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Buy UltraTech Cement; target of Rs 2930: Religare Capital

Religare Capital is bullish on UltraTech Cement and has recommended buy rating on the stock with a target of Rs 2930 in its October 18, 2014 research report.

October 21, 2014 / 03:16 PM IST
 
 
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Religare Capital`s research report on UltraTech Cement

Topline soars 20% YoY: UTCEM’s topline grew 20% YoY to Rs 53.8bn led by volume growth of 12% (incl. volumes from the acquired JPA plant), while realisations soared 7% YoY. Realisations increased ~7% QoQ as well – a surprise vs. our estimate of -0.5% QoQ, led by higher volume contribution from South India (from new capacities), where prices didn’t moderate much during the monsoons. Higher realisation bolsters EBITDA/t: Led by better-than-expected realisations, UTCEM clocked an EBITDA/t of Rs 780/t (RCMLe Rs 700), up by Rs 80 YoY (down Rs 60 QoQ). Costs increased across the board with power & fuel cost/t rising 6% QoQ (on higher petcoke prices), while freight cost/t rose 9% QoQ. Other expense/t also jumped sharply by 15% QoQ. EBITDA margin for Q2 improved 70bps YoY but the higher costs led to a 240bps QoQ decline to 15.4% (RCMLe 14.9%). Better operating profits, other income and lower taxes boosted PAT by 55% YoY to Rs 4.1bn. Taxes for the quarter stood at 19% (RCMLe 29%). Interest expense jumped sharply to Rs 1.4bn in Q2 (Rs 1bn in Q1FY15), reflecting the full impact of the JPA acquisition. Maintain BUY, TP Rs 2,930: We marginally lower our estimates by 7%/6%/2% for FY15/FY16/FY17 to factor in higher costs and roll over to a new Dec’15 TP of Rs 2,930, based on 11x one-year fwd EV/EBITDA. With ~15% correction from the peak since September, valuations look attractive. Maintain BUY. "UTCEM’s Q2FY15 PAT beat estimates at Rs 4.1bn (RCMLe Rs 3.5bn) led by better margins and lower taxes. EBITDA/t increased by Rs 80 YoY (down Rs 60 QoQ) to Rs 780/t driven by better realisations due to higher sales in southern markets, which offset the uptick in power and fuel/freight costs. We trim estimates to account for higher costs and roll over to a new Dec’15 TP of Rs 2,930 (Rs 3,020 earlier). Valuations are attractive and we remain positive on the stock given a healthy long-term industry outlook,” says Religare Capital research report.

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first published: Oct 21, 2014 03:16 pm

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