UltraTech Cement Result Updated

Please refer to important disclosures at the end of this report

1

Y/E Mar (

`

cr) 3QFY2012 2QFY2012

% Chg qoq

3QFY2011

% Chg yoy

Net sales 4,572 3,910

16.9

3,715

23.1

Operating profit 1,044 652

60.0

733

42.3

OPM (%) 22.4 16.4

605bp

19.6

284bp

Net profit 617 279

121.2

319

93.4

Source: Company, Angel Research

During 3QFY2012, UltraTech Cement (ULTC) posted strong 93.4% yoy growth inits bottom line on account of substantial 16.4% yoy growth (up 6% sequentially) inblended realization. Domestic dispatches (incl. clinker and white cement) rose by 6.2% yoy to 9.97mn tonnes. During the quarter, ULTC’s bottom line was boostedby

`

66.6cr of subsidies relating to previous years

in terms of state investmentpromotion scheme.

We remain Neutral on the stock.

OPM up by 284bp yoy:

During 3QFY2012, ULTC’s net sales grew by 23.1% yoy to

`

4,572cr, primarily on account of higher realization. The company’s blendedrealization improved by 16.4% yoy to

`

4,313/tonne. However, the company faced margin pressure on account of higher power and fuel (P&F) and freightcosts. Per tonne P&F costs rose on account of costlier domestic and imported coal. While the cost of domestic coal was higher on a yoy basis due to price hikecarried out by Coal India in February 2011, imported coal costs increasedbecause of INR depreciation. Despite cost pressures, strong realizations resultedin a 284bp yoy expansion in OPM to 22.4%

Outlook and valuation:

We expect ULTC to post a 22.4% CAGR in its top lineover FY2011-13, aided by higher volumes (also FY2011 financials included only nine months of Samruddhi’s operations). Going ahead, we expect ULTC to facecost pressures due to the new calorific value-based pricing system introduced by Coal India. At current levels, the stock is trading at EV/EBITDA of 7.3x on FY2013estimates, which we believe is fair. Hence,

we continue to maintain our Neutralrecommendation on the stock.

Key financials (Standalone)

Y/E March (

`

cr) FY2010 FY2011 FY2012E FY2013ENet Sales

7,050 13,210 18,021 19,806

% chg

10.4 87.4 36.4 9.9

Net Profit

1,093 1,404 2,037 2,267

% chg

11.9 28.4 45.1 11.3

OPM (%)

28.9 20.5 21.7 21.7

FDEPS(

`

)

87.8 51.2 74.3 82.7

P/E(x)

13.9 23.8 16.4 14.7

P/BV(x)

3.3 3.1 2.7 2.3

RoE(%)

26.6 18.4 17.7 17.1

RoCE(%)

24.4 16.5 17.4 17.5

EV/Sales (x)

2.2 2.6 1.8 1.6

EV/EBITDA

7.6 12.7 8.4 7.3

Source: Company, Angel Research; Note: FY2010 and FY2011 financials do not include the fullimpact of Samruddhi’s merger

NEUTRAL

CMP

`

1,218Target Price

-

Investment Period -

Stock InfoSectorBloomberg CodeShareholding Pattern (%)Promoters63.4MF / Banks / Indian Fls10.6FII / NRIs / OCBs19.0Indian Public / Others7.1 Abs. (%)3m1yr3yrSensex0.3(11.3)95.9Ultra Tech7.819.7208.21016,9965,127ULTC.BO

UTCEM@IN

Face Value (Rs)BSE SensexNifty Reuters Code33,3760.51,281/89010116Cement Avg. Daily VolumeMarket Cap (Rs cr)Beta52 Week High / Low

V.Srinivasan

+91 22 39357800 Ext. 6833v.srinivasan@angelbroking.com

Sourabh Taparia

+91 22 39357800 Ext. 6872sourabh.taparia@angelbroking.com

UltraTech Cement

Performance highlights

3QFY2012 Result Update| Cement

January 24, 2012

UltraTech Cement

|

3QFY2012 Result Update

January 24, 2012

2

Exhibit 1:

3QFY2012 performance (Standalone)

Y/E March (

`

cr) 3QFY2012 2QFY2012

% Chg qoq

3QFY2011

% Chg yoy

9MFY2012 9MFY2011

% Chg

Net Sales 4,572 3,910

16.9

3,715

23.1

12,847 10,920

17.6

Other operating Income

79 71

11.4

26

208.0

189 89

112.5

Total Operating Income 4,651 3,981

16.8

3,741

24.3

13,036 11,009

18.4

Net raw-material costs 631 667

(5.3)

514

22.8

1,802 1,493

20.7(% of sales) 13.8 17.1 13.8 14.0 13.7

Power & fuel 1,119 955

17.1

896

24.9

3,114 2,638

18.0(% of sales) 24.5 24.4 24.1 24.2 24.2

Staff costs 223 206

8.2

188

18.7

613 547

11.9(% of sales) 4.9 4.5 4.1 4.8 5.0

Freight & forwarding 840 748

12.3

728

15.3

2,357 2,142

10.1(% of sales) 18.4 16.4 15.9 18.3 19.6

Other expenses 794 753

5.5

681

16.6

2,226 1,984

12.2(% of sales) 17.4 16.5 14.9 17.3 18.2

Total Expenditure

3,607 3,328

8.4

3,007

19.9

10,112 8,804

14.9

Operating Profit 1,044 652

60.0

733

42.3

2,923 2,204

32.6

OPM (%) 22.4 16.4

605bp

19.6

284bp

22.4 20.0

240bp

Interest 30 67

(56.0)

82

(63.9)

169 245

(30.9)

Depreciation 224 223

0.4

219

2.1

669 651

2.9

Other Income 76 33

135.1

35

118.5

136 126

7.9

PBT 867 395

119.5

468 2,221 1,434

54.8

Provision for Taxation 250 116

115.4

149

68.5

642 442

45.2(% of PBT)

28.9 29.4 31.8 28.9 30.8

Reported PAT 617 279

121.2

319

93.4

1,579 992

59.1

PATM (%) 13.5 7.1 8.6 12.3 9.1

EPS (

`

)

22.5 10.2 11.6 57.6 36.2

Source: Company, Angel Research

Exhibit 2:

Financial performance

Source: Company, Angel Research

3,2453,7414,5564,4043,9814,6511163197276832796171215182124273008001,6002,4003,2004,0004,8005,6002QFY11 3QFY11 4QFY11 1QFY12 2QFY12 3QFY12(%)(

`

cr)

Net operating income Net Profit OPM (RHS)

UltraTech Cement

|

3QFY2012 Result Update

January 24, 2012

3

Exhibit 3:

3QFY2012 – Actual vs. Angel estimates

(

`

cr) Actual Estimates

Variation (%)

Net sales 4,572 4,180

9.4

Operating profit 1,044 763

36.7

Net profit 617 352

75.2

Source: Company, Angel Research

Performance highlights

Net sales up 23.1% yoy, aided by higher realization

During 3QFY2012, ULTC’s net sales rose by 23.1% yoy on account of higherblended realization. During the quarter, realization improved by 16.4% yoy to

`

4,313/tonne. The company’s domestic dispatches (incl. clinker and white cement)stood at 9.97mn tonnes, up 6.2% yoy, in 3QFY2012.

Strong realization results in OPM expansion, despite cost pressures

ULTC faced margin pressure on account of higher P&F and freight costs. P&F costsrose on account of costlier and imported coal. During the quarter, while the cost ofdomestic coal was higher on yoy basis due to price hike carried out by Coal Indiain February 2011, imported coal costs increased on account of INR depreciation.Despite cost pressures, strong realization resulted in a 284bp yoy expansion inOPM to 22.4%.

Per tonne analysis

During 3QFY2012, ULTC’s blended realization per tonne rose by 16.4% yoy to

`

4,313. Raw-material cost per tonne rose by 16.2% yoy. P&F cost per tonne roseby 18.1% yoy on account of increased coal prices, both domestically andinternationally. Domestic fuel costs were higher on a yoy basis due to the pricehike by Coal India during February 2011. During 3QFY2012, although globalcoal prices were flat on yoy USD terms, the substantial depreciation in INR madeimported coal expensive. Freight cost/per tonne rose by 9.1% yoy. The company’soperating profit/tonne increased by 28.9% yoy to

`

910.

Exhibit 4:

Operational performance

Particulars (

`

) 3QFY2012 2QFY2012 3QFY2011

chg (%) yoy chg (%) qoq

Realization/tonne

4,313 4,069 3,706

16.4 6.0

Raw-material cost/tonne