UltraTech Cement (ULTC) reported profit after tax (PAT) of R600 crore. While the company?s PAT declined 3% y-o-y, Ebitda rose 7% to R1,020 crore. Ebitda/t was R1,030 against R962 last year (R1,082 in Q2); margins were flat y-o-y at 21%. Operating performance improved as realisations rose y-o-y (lower q-o-q).
ULTC?s sales volumes (cement + clinker) were flay y-o-y at 9.9 million tonne. While data for the industry are not available, conversations with industry sources indicate muted demand during Q3.
Most demand growth has been from rural housing (40% of consumption). There are indications of demand improving, particularly in North India as the severe winter subsides. ULTC?s markets are spread across India: North 30%, West 30%, South 20% and East 20%.
After a strong Q2 (prices did not decline despite the monsoon), Q3 realisations were down ~3% q-o-q (+7% y-o-y). Prices across India were on a downtrend in Q3. Our channel checks suggest cement prices have been raised by 7-10% in north and west India in January 2013 with further hikes expected soon. Production indiscipline in the South continues to keep prices low.
Hikes were seen mainly in raw material per tonne (+16%) and freight per tonne (+12%), impacted by higher railway freight and the diesel price hike. Power costs declined 4% y-o-y (lower imported coal costs; higher pet coke consumption). ULTC imports ~25- 30% of its coal requirements.
ULTC is in the process of commissioning two cement plants ? 4.8 mtpa in Chhattisgarh and 4.4 mtpa in Karnataka ? at a capex of ~R5,900 crore and an additional R6,000 crore on logistics, power, RMC and modernisation. The company expects the expansions to be completed by early FY14, taking its total capacity to 61 mtpa.
ULTC?s Ebitda/t is among the highest in India. It also has the additional advantage of its niche white cement/putty divisions (small but profitable). The stock?s 39% rally in a year discounts most positives and our constructive outlook on the Indian cement sector. Prefer Grasim to ULTC.Citigroup
