UTCEM’s volumes grew 20% Y-o-Y to 15.8 mt (our estimate: 16.7mt) in 2QFY19. Realisations increased 1.4% Q-o-Q to Rs 5,015/t (in-line) due to higher prices in the central, north and southern markets. Net sales grew 21% Y-o-Y (-8% QoQ) to Rs 7,9 00 crore (our estimate: Rs 8,370 crore). Cost/t was up 4% Q-o-Q, led by an increase in power & fuel cost/t and other expenses/t. EBITDA/t, thus, declined 12% QoQ to Rs 818 (our estimate: Rs 871).
Consequently, EBITDA declined by 20% QoQ (-4% YoY) to Rs 12.9 bn (our estimate: Rs 14.5 bn), with the margin contracting 2.4pp Q-o-Q to 16.3%. PAT was down 9.4% Y-o-Y to Rs 390 crore (our estimate: Rs 520 crore).Volumes grew 26.5% Y-o-Y in 1HFY19, resulting in sales, EBITDA and PAT growth of 25.6% Y-o-Y, 0%Y-o-Y and -25%Y-o-Y respectively. We expect volumes to increase 10.6% Y-o-Y in 2HFY19.
Sales, EBITDA and PAT are expected to grow by 14% Y-o-Y, 11.5% Y-o-Y and 25% Y-o-Y for the second half of the fiscal year. (1) The company completed commissioning of two 13MW WHRS in 2QFY19, achieving total WHRS capacity of 85MW. (2) The industry should witness new capacity addition of 15-17mtpa and demand growth of 25-27mtpa. (3) Industry demand grew by 10-11% in 2QFY19, while utilization stood at 65%.
With 23% market share, UTCEM is likely to emerge as a beneficiary of a likely upturn in the Indian cement cycle over FY18-20. We value UTCEM at 14x Sept’20 EBITDA to arrive at a TP Rs 4,157. Maintain ‘buy’. UtraTech Cement is the manufacturer of grey cement, ready mix Concrete (RMC) and white cement in India.
The company has an installed capacity of 96.5 million tonne per annum (MTPA) of grey cement. UltraTech Cement has 19 integrated plants, 1 clinkerisation plant, 25 grinding units and 7 bulk terminals. Its operations span across India, the UAE, Bahrain, Bangladesh and Sri Lanka. UltraTech Cement is also India’s largest exporter of cement, reaching out to meet the demand in countries around the Indian Ocean and the West Asia.