UltraTech Cement (UltraTech)’s 3QFY2016 numbers have come in better than
our expectations on the top-line and operational fronts. The company’s net sales
rose by 4.7% yoy to Rs5,747cr, aided by better than expected volume growth of
7.1% yoy. Blended realization was under pressure, down by 2.3% yoy, and was
slightly lower than our estimate. The EBITDA increased by 23% yoy to Rs1,044cr
and the same was above our estimate of Rs975cr. The EBITDA margin came in at
18.2%, also above our estimate of 17.3%, backed by strong operational
efficiency. The PAT came in at Rs509cr, up 39.6% yoy, which is above our
estimate of Rs435cr, driven by margin expansion.
EBITDA margin healthy at 18.2%: For 3QFY2016, UltraTech reported an EBITDA
growth of 23% yoy to Rs1,044cr, as against our estimate of Rs975cr. The strong
EBIDTA performance was led by operational efficiency. The operating cost/tonne
declined by 4.6% yoy to Rs4,055, led by 13.9% yoy decline in power & fuel
cost/tonne, largely due to softening pet coke prices. Higher pet coke usage at
74% vs 65% in the sequential previous quarter helped savings in power & fuel
cost. The EBITDA margin increased by 280bp yoy to 18.2% and was above our
expectation of 17.3%. The blended EBITDA/tonne came in at Rs900, an increase
of 16.1% yoy.
Outlook and valuation: We expect UltraTech to post a 13.6% CAGR in its topline
on back of new capacity expansion and healthy expected realization over
FY2015-17 period. The company’s bottom-line is expected to grow at a CAGR of
28% yoy over the same period. At the current levels, the stock is trading at 13x
EV/EBITDA and at an EV/tonne of US$165 on FY2017 capacity. We maintain
our Accumulate rating on the stock with a revised target price of Rs3,107.

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