Ultratech Cement Revenues grew 1.3% yoy (Rs16.51 bn) Target: Rs 980

Ultratech Cement Ltd.

 

Price pains

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ACUMULATE

 

CMP: Rs 1,002                                     Target Price: Rs 980

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Ultratech Cement Ltd (UTCL) Q3FY10 net profit at Rs1.96 bn (-17.8% yoy) is below our expectation (Rs2.34 bn), primarily on account of lower than expected cement realization.  Revenues grew 1.3% yoy (Rs16.51 bn) as benefits of 12% volume growth (5.05mt) were negated by a sharp 9% decline in blended realizations (Rs3272) (our expectation Rs3322) as UTCL's key markets of West and South faced heat of lower offtake and excess supply in the regions. Sequentially also realization fell by Rs484/ton or Rs24/bag.  EBITDA for the quarter followed the trend in realization and declined 11% yoy and 18% sequentially. Power & Fuel cost fell 39% yoy and 7% sequentially as UTCL benefited from low cost inventory of imported coal and also from its newly commissioned CPPs. To factor in the recent pricing pressure in UTCL's key markets, we are down grading our FY2010 & FY2011 earnings estimates by 4.1% (EPS Rs90.4) and 4.2% (Rs77) respectively. Ultratech stock outperformed sensex by 20% over last 3 months on the back of recent news of price hikes in western and southern region. However after the recent run up the stock looks fairly valued at  13X FY2011 earnings and USD 120 EV/ton. We would be looking to ACCUMULATE the stock at lower levels.

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