We cite gradual improvement in industry cement demand, UTCEM’s positioning with timely capacity additions, and its pan-India presence. Cost focus should further aid earnings growth. We believe current multiples are sustainable, as we project 25% Ebitda CAGR over FY17-19. Ultratech reported a 7% y-o-y decline in FY17Q4 standalone Ebitda, to Rs 12.8 bn, ahead of consensus and our estimate. The key positive surprise was lower-than expected cost and marginally better-than-expected blended realisation. However, this was partly offset by a marginal miss on volumes.
Reported PAT declined 12% y-o-y, to Rs 6.8 bn, helped by higher other income that was ahead of our estimate. The company recommended a final dividend of 10 per share for FY2017. The results support our view that with its pan-India presence, cost focus and a strong brand, the company is well positioned in the looming up-cycle. Moreover, we highlight that exit prices for the quarter were higher than the average for the quarter and the industry has taken further price hikes in Apr-17, and costs are likely to remain benign in the near term, which should support earnings momentum.
Revenues grew 3% y-o-y
Ultratech’s revenues, at Rs 66 bn, grew 3% y-o-y, in line with consensus and our estimate. This was driven by marginally better-than expected realisation, partly offset by a marginal miss on volumes. Total cement volumes grew 1% y-o-y to 13.7 mnt, while domestic volumes were flat at 13.4 mnt. On a sequential basis, domestic volumes grew 20%, helped by seasonality and some demand pick-up following the impact of demonetisation in QE Dec-16. White cement volumes were also flat y-o-y at 0.39 mnt. We expect demand momentum to improve in ensuing quarters, which should further support earnings growth.
Blended realisations were up 2% y-o-y, marginally better than our estimate. We believe that with a gradual demand recovery in FY18Q1 on the back of government spending on housing, infrastructure, irrigation and railways, and a pick-up in housing demand, realisations too should firm up. Standalone Ebitda at `12.8 bn; down 7% y-o-y but 4% ahead of our estimate
Ebitda at `12.8 bn was supported by lower-than-expected costs. The 7% y-o-y decline was led by a 210 bps y-o-y margin decline. We estimate per ton Ebitda at Rs 934, vs. our estimate of Rs 893. PBTs at Rs 10.3 bn was down 2% given higher interest costs that were partly offset by higher-than-expected other income.
Costs declined sequentially, were marginally below our estimate Ultratech’s per ton costs declined 1% q-o-q, aided by lower-than-expected energy and employee costs, which were partly offset by higher material costs. We expect costs to remain benign in the near term. Energy cost declined 1% sequentially, and was 4% below our estimate. Freight costs increased marginal 1% y-o-y and 2% on sequential basis, in line with our estimate.