1
Please refer to important disclosures at the end of this report
1
1
Quarterly Summary:
Y/E March (` cr)
Q 2Y19
% yoy
Q 1FY20
% qoq
Revenue
9,249
4.0
11,405
(15.6)
EBITDA
1,421
35.0
2,950
(35.0)
OPM (%)
15.4
450bps
25.9
(600 bps)
Adjusted PAT
356
63
1,281
(55)
Source: Company, Angel Research (All the above numbers are inclusive of Century cement).
Century Cement merged with Ultratech: In Q2FY20, consolidated revenue,
EBIDTA, PAT grew by 4%, 35% and 62.6% YoY respectively (including impact of
Century Cement in both the quarters). Operating margin also improved by 5%
YoY due to better realizations & cost control. Company reported `1055 EBIDTA/
tonne compared to `776 EBIDTA/tonne in Q2FY19.
Favourable Cost trends & debt reduction: Logistics cost declined 8% YoY to
`1,111. Energy cost as well as raw materials costs also declined by 9% & 2% YoY
to `1003 & `495 respectively. Consolidated net debt had decreased by `1,492
cr. to `20,619 compared to Mar’19. Net debt/EBIDTA as of sept’19 is 2.0x.
Increase in Capacity: The board has approved 3.4mt capacity expansion in
Eastern India to be completed by Q4FY21 at a capex of `940cr. During Jan-
March period Ultratech’s plants runs at 110% of capacity in eastern India.
Century Cement: Century Cement utilization dropped to 48% for the quarter as
compared to 64% in Q2FY19. Utilization ratio decreased as there was plant
shutdown for 16 days. Management guided that within next 12 months Century
should be in line with Ultratech utilization ratio & EBIDTA/tonne. Management
guided out of 14.6 MMTPA capacity of Century, 12.6 will be sold in the name of
Ultratech by upcoming December 2019.
Outlook and Valuation: We are positive on the long term prospects of the
Company given ramp up from acquired capacities, pricing discipline in the
industry and benign energy & freight costs. Synergy benefit is yet to play out for
the inorganic expansion of JP associates, Binani & Century cement. We maintain
our “Buy” recommendation on Ultratech by valuing it at 15x FY21E EV/EBIDTA to
arrive at a target price of `4984.
Key Financials
Y/E March ( ` cr)
FY18
FY19
FY20E
FY21E
Net Sales
30,978.6
37,379.2
43,916.1
47,482.1
% chg
22.1
20.7
17.5
8.1
Net Profit
2,224.6
2,431.1
4,050.9
4,670.3
% chg
-18.0
9.3
66.6
15.3
EBITDA (%)
19.8
18.2
22.3
22.7
EPS (Rs)
80.9
88.7
140.4
161.8
P/E (x)
51.5
47.0
29.7
25.8
P/BV (x)
6.0
5.2
4.7
4.3
RoE (%)
8.75
8.89
12.32
11.83
RoCE (%)
10.92
9.58
12.57
12.65
EV/EBITDA
22.1
20.8
14.2
12.5
EV/Sales
4.4
3.8
3.2
2.8
Source: Company Valuation as on closing price as on 01/11/2019
Note: FY20E & FY21E numbers includes Century Cement for full F.Y.
BUY
CMP `4177
Target Price `4984
Investment Period 12 months
Stock Info
Sector
Bloomberg Code
Shareholding Pattern (% )
Promoters
MF / Banks / Indian Fls
FII / NRIs / OCBs
Indian Public / Others
Abs . (% ) 3m 1yr 3yr
Sens ex 3.8 16.5 44.0
Ultraterc h Cement (4.2) 19.0 4.7
61.7
11.9
17.9
8.5
Net Debt (` cr)
Market Cap (` cr)
120,142
20,619
Beta
1.4
52 Week High / Low
4905/3261
Avg. Daily Monthly V olume
543,727
Face V alue (`)
10
BS E Sens ex
40,165
Nifty
11,890
ULTC.NS
Reuters Code
UTCEM:IN
Cement
Price Chart
Source: Company, Angel Research
Research Analyst
Jyoti Roy
+022 39357600, Extn: 6842
jyoti.roy@angelbroking.com
Keshav Lahoti
+022 39357600, Extn: 6363
keshav.lahoti@angelbroking.com
-
1,000
2,000
3,000
4,000
5,000
Nov-16
Jan-17
Apr-17
Jul-17
Oct-17
Jan-18
Apr-18
Jul-18
Oct-18
Jan-19
Apr-19
Jul-19
Oct-19
Ultratech Cement
Performance Update
Q2FY2020 Result Update | Cement
November 2, 2019
2
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
2
Exhibit 1: Q2FY20 Performance
Y/E March (` cr)
Q 2FY20
Q 2Y19
% yoy
Q 1FY20
% qoq
FY2020E
FY2019
% chg
Net Sales
9620.5
9249.3
4.0
11404.9
-15.6
43916.1
37379.2
17.5
Cost of Materials Consumed
1523.8
1393.0
9.4
1614.4
-5.6
7061.0
6527.1
8.2
(% of Sales)
15.8
15.1
14.2
16.1
17.5
Employee Benefit Expense
638.4
603.8
5.7
596.0
7.1
2436.5
2058.8
18.3
(% of Sales)
6.6
6.5
5.2
5.5
5.5
Power & Fuel
1965.8
2265.0
-13.2
2344.6
-16.2
9084.6
8427.9
7.8
(% of Sales)
20.4
24.5
20.6
20.7
22.5
Freight & Forw arding Expense
2115.5
2281.0
-7.3
2520.3
-16.1
9816.5
8846.7
11.0
(% of Sales)
22.0
24.7
22.1
22.4
23.7
Other Expenses
1459.0
1285.3
13.5
1379.6
5.8
5704.9
4730.5
20.6
(% of Sales)
15.2
13.9
12.1
13.0
12.7
Total Expenditure
7702.4
7828.1
-1.6
8454.9
-8.9
34103.6
30591.0
11.5
Operating Pr ofit
1918.1
1421.2
35.0
2950.0
-35.0
9812.5
6788.2
44.6
OPM margin
19.9
15.4
25.9
22.3
18.2
Interest
507.1
416.4
21.8
502.8
0.9
1715.1
1548.5
10.8
Depreciation
668.4
624.0
7.1
688.4
-2.9
2766.6
2139.8
29.3
Other Income
153.7
142.8
7.6
134.2
14.6
540.0
438.0
PBT (excl. Ext Items)
896.2
523.6
71.2
1893.0
-52.7
5870.8
3537.9
65.9
Exceptional item (Income)/Expense
6.2
0.0
0.0
0.0
0.0
0.0
0.0
Share of profit/ (loss) of associates & JV
-0.2
0.4
0.4
PBT (incl. Ext Items)
889.8
523.6
69.9
1893.0
-53.0
5870.8
3537.9
65.9
(% of Sales)
9.2
5.7
16.6
13.4
9.5
Provision for Taxation
311.3
167.7
611.8
1819.9
1106.8
Taxation pertaining to earlier years
0.0
0.0
0.0
0.0
0.0
(% of PBT)
35.0
32.0
32.3
31.0
31.3
Reported PAT
578.6
355.9
62.6
1281.2
-54.8
4050.9
2431.1
66.6
Adjusted PAT
578.6
355.9
1281.2
4050.9
2431.1
PATM
6.0
3.8
11.2
9.2
6.5
Source: Company, Angel Research
Note: Except FY19 all numbers includes Century Cement for full F.Y.
3
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
3
Downside risks to our estimates
Demand not picking up as expected.
Reduced Infrastructure spends by G overnment.
Increase in supply.
Delay in syner gy benefits from inorganic expansion.
4
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
4
Consolidated Profit & Loss Statement
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Revenue
30,978.6
37,379.2
43,916.1
47,482.1
% chg
22.1
20.7
17.5
8.1
Total Expenditure
24,833.5
30,591.0
34,103.6
36,699.3
Cost of Materials Consumed
5,288.8
6,527.1
7,061.0
7,634.4
Employee Benefit Expense
1,810.2
2,058.8
2,436.5
2,608.5
Power & Fuel
6,334.1
8,427.9
9,084.6
9,822.3
Freight & Forw arding Expense
7,310.0
8,846.7
9,816.5
10,405.5
Other Expenses
4,090.4
4,730.5
5,704.9
6,228.7
EBITDA
6,145.1
6,788.2
9,812.5
10,782.8
% chg
17.9
10.5
44.6
9.9
(% of Net Sales)
19.8
18.2
22.3
22.7
Depreciation& Amortisation
1,847.9
2,139.8
2,766.6
3,046.1
EBIT
4,297.2
4,648.4
7,045.9
7,736.6
% chg
11.2
8.2
51.6
9.8
(% of Net Sales)
13.9
12.4
16.0
16.3
Interest & other Charges
1,237.6
1,548.5
1,715.1
1,518.0
Other Income
588.6
438.0
540.0
550.0
(% of PBT)
16.1
12.4
9.2
8.1
Recurring PBT
3,648.2
3,537.9
5,870.8
6,768.6
% chg
(5.8)
(3.0)
65.9
15.3
Exceptional Ite ms
(346.6)
-
-
-
Tax
1,077.0
1,106.8
1,819.9
2,098.3
Current & deferred tax
1,077.0
1,106.8
1,819.9
2,098.3
Taxation pertaining to earlier years
-
-
-
-
(% of PBT)
29.5
31.3
31.0
31.0
PAT (reported)
2,224.6
2,431.1
4,050.9
4,670.3
ADJ. PAT
2,571.2
2,431.1
4,050.9
4,670.3
% chg
(5.2)
(5.4)
66.6
15.3
(% of Net Sales)
8.3
6.5
9.2
9.8
Basic EPS (Rs)
80.9
88.7
140.4
161.8
Fully Diluted EPS (Rs)
80.8
88.7
140.4
161.8
% chg
(18.3)
9.7
58.3
15.3
Source: Company, Angel Research
Note: FY20E & FY21E numbers includes Century Cement for full F.Y.
5
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
5
Exhibit 2: Consolidated Balance Sheet
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
SOURCES OF FUNDS
Equity Share Capital
274.6
274.6
288.6
288.6
Reserves& Surplus
26,106.6
28,114.3
37,089.5
41,325.8
Shareholders Funds
26,381.2
28,388.9
37,378.1
41,614.4
Minority Interest
16.0
12.2
10.9
10.2
Total Debt
19,480.2
22,818.4
23,536.4
19,836.4
Other Liabilities
191.7
172.5
189.7
208.7
Net Deferred tax
3,173.3
3,541.8
4,187.6
4,932.2
Total Liabilities
49,242.4
54,933.7
65,302.6
66,601.7
APPLICATION OF FUNDS
Gross Block
43,045.5
49,715.3
58,778.3
60,678.3
Less: Acc. Depreciation
4,366.5
6,426.6
8,141.7
9,659.8
Net Block
38,679.0
43,288.7
50,636.6
51,018.6
Capit al Work-in-Progre ss
1,511.2
1,122.1
1,180.0
1,210.0
Goodwill on Consolidation
1,036.3
2,847.1
2,847.1
2,847.1
Non current Investments
1,497.9
1,405.3
1,500.0
1,550.0
Other non-current assets
2,955.5
4,105.7
4,800.0
5,500.0
Current Assets
11,461.2
11,754.7
15,341.8
16,576.7
Investment
3,949.0
1,516.0
3,700.0
3,750.0
Inventories
3,267.6
3,585.1
3,830.8
4,102.3
Sundry Debtors
2,220.6
2,531.4
2,767.3
2,992.0
Cash & Bank Balance
219.1
707.2
928.7
1,217.4
Loans & Advances
1,804.9
3,415.0
4,115.0
4,515.0
Current liabilities
7,898.7
9,589.9
11,002.9
12,100.7
Net Current Assets
3,562.5
2,164.8
4,338.9
4,476.0
Total Assets
49,242.4
54,933.7
65,302.6
66,601.7
Source: Company, Angel Research
Note: FY20E & FY21E numbers includes Century Cement for full F.Y.
6
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
6
Exhibit 3: Consolidated Cash Flow
Y/E March (` cr)
FY2018
FY2019
FY2020E
FY2021E
Net Profit
3,301.5
3,538.4
5,870.8
6,768.6
Depreciation
1,847.9
2,139.8
2,766.6
3,046.1
Interest
1,171.5
1,454.1
1,715.1
1,518.0
Change in Working Capital
(1,255.4)
(937.4)
(951.9)
(758.2)
Others
(334.9)
(324.9)
-
-
Taxes paid
(842.9)
(710.1)
(1,174.2)
(1,353.7)
Cash Flow from Operations
3,887.7
5,159.9
8,226.5
9,220.9
(Inc.)/ Dec. in Fixed Assets
(1,876.6)
(1,503.9)
(2,100.0)
(3,458.1)
(Inc.)/ Dec. in Investments
3,742.3
2,749.1
(2,818.7)
(650.0)
Cash Flow from Inve sting
1,865.7
1,245.2
(4,918.7)
(4,108.1)
Issue of Equity
15.7
5.2
-
-
Inc./(Dec.) in borrowings
6,479.7
(4,137.7)
(1,800.0)
(3,700.0)
Dividend(includind DDt)
(334)
(346)
(400)
(435)
Interest paid
(1,210)
(1,484)
(1,715)
(1,518)
Others
(10,687)
(83)
540
550
Cash Flow from Financing
(5,735.1)
(6,045.0)
(3,375.1)
(5,102.8)
Inc./(Dec.) in Cash
18.4
360.1
(67.3)
10.0
Opening Cash balances
58.8
77.2
437.2
370.0
Closing Cash balances
77.2
437.2
370.0
380.0
Source: Company, Angel Research
Note: FY20E & FY21E numbers includes Century Cement for full F.Y.
Exhibit 4: Key Ratios
Y/E March
FY2018
FY2019
FY2020E
FY2021E
Valuati on Ratio (x)
P/E (on FDEPS)
51.5
47.0
29.7
25.8
P/CEPS
25.8
23.2
16.1
14.2
P/BV
6.0
5.2
4.7
4.3
Dividend yield (%)
0.0
0.0
0.0
0.0
EV/Sales
4.4
3.8
3.2
2.8
EV/EBITDA
22.1
20.8
14.2
12.5
EV / Total Assets
9.6
9.4
7.5
6.7
Per Share Data (Rs)
EPS (Basic)
80.9
88.7
140.4
161.8
EPS (fully diluted)
80.8
88.7
140.4
161.8
Cash EPS
161.4
179.9
258.6
293.2
DPS
10.0
10.5
11.5
12.5
Book Value
693.9
799.7
888.6
960.7
Returns (%)
ROE
8.8
8.9
12.3
11.8
ROCE
10.9
9.6
12.6
12.6
Angel ROIC (Pre tax)
14.4
11.4
14.9
15.2
Source: Company, Angel Research (Valuation done as on 1/11/19)
Note: FY20E & FY21E numbers includes Century Cement for full F.Y.
7
Ultratech Cement | Q2FY2020 Result Update
November 2, 2019
7
Research Team Tel: 022 - 39357800 E-mail: research@angelbroking.com Website: www.angelbroking.com
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Ratings (Based on Expected Returns: Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%)
Over 12 months investment period) Reduce (-5% to -15%) Sell (< -15%)
Hold (Fresh purchase not recommended)