29-Jan-2022

ULTRATECH CEMENT LIMITED

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Ultratech Cement Limited is India’s largest cement producer and is a cement flagship company of the Aditya Birla Group with an
DHD capacity of 114.55 million metric tonne per annum (MTPA) in India and 119.05 MTPA including global capacities, as on January
installed
2022. It also has an installed capacity of 1.5 MTPA of white cement and wall care. The company had 151 ready mix concrete (RMC)
plants as on 31st December 2021. It has power generation capacity of 1,549 megawatt (MW) including 156 MW from waste heat
recovery system and 221 MW from renewable power.
It is having 22 integrated manufacturing units in India, 1 clinkerisation unit outside India and 23 grinding units in India and 4 outside
India. It has 7 bulk packaging terminals, 6 in India and 1 in Sri Lanka. Average capacity utilization for last 5 years was 70% on a
standalone basis. The company has its captive limestone and coal blocks in order to have a raw material security.
Over the years, capacity evolution has been driven by organic and inorganic expansion. Out of the total 119.05 MTPA, 66.3 MTPA was
added through inorganic means and remaining 53.7 MTPA through organic means. In FY19, it acquired Binani Cement Ltd later renamed
it to Ultratech Nathdwara Cement Ltd (UNCL) with an installed capacity of 6.25 MTPA, cement business of Jaiprakash Associates (JAL)
and Jaypee Cement Corporation Ltd, installed capacity of 21.2 MTPA. In FY20, it also acquired the cement business of Century Textiles
and Industry Ltd (CTIL), with a capacity of 14.6 MTPA.
It had 33,505 dealers and 74,535 retailers as on 31st March 2021. The company has a nationwide reach with strong logistics presence
across India, the transportation mix is 73% roadways followed by railways and sea routes constituting 25% and 2%, respectively. It has a
market share of ~21% in India.

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DHD

The company provides a wide range of innovative solutions that cater to

various aspects of construction, from foundation to finish. Its products
are distinguished based on conventional and contemporary products
and services. The conventional that positions cement at the core of all
construction and the contemporary that provides solutions to related
construction products and services.

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DHD Sector Wise Cement Demand (FY21)

Cement Sales Volume*
(Million Metric Tonne, MMT)
84.64 85.10
81.81
10%

63.28
13%
52.40

55%

22%

Housing and Real Estate Infrastructure

Low-cost Housing Industrial Development FY17 FY18 FY19 FY20 FY21
*Grey Cement

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 GROWTH
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DHD SALES GROWTH

In FY21, the company reported net sales of ₹44,726
cr, a growth of 5.4% YoY. Sales volume of grey cement
witnessed an increase of 4% YoY from 81.81 MMT in
FY20 to 85.10 MMT in FY21. Cement consumption
started improving from pick up in infrastructure
activities, during H2 FY21.
For 9M FY22, net sales stood at ₹36,832 cr as
compared to ₹30,320 cr in 9M FY21, a growth of
21.5% YoY.
In Q3 FY22, net sales stood at ₹12,985 cr as against
₹12,262 cr in Q3 FY21, a growth of 5.9% YoY.
However, grey cement sales volume registered a de-
growth of ~3%. The demand was low in the month of
October and November.
Trade to non-trade sales mix stood at 64:36 in Q3
FY22.

5 Year CAGR: 9.5%

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DHD EBITDA GROWTH

In FY21, EBITDA was ₹11,568 cr, registering a growth
of 25.1% YoY. EBITDA was driven by higher sales
volume, improved due to reduction in power & fuel
cost during the year. EBITDA/tonne for FY21 was
₹1,424. Average EBITDA/tonne for last 5 years was
₹1,131.
The company increased its share of consumption of
renewable energy (solar & waste heat recovery
system) from 7% in FY18 to 13% in FY21.
For 9M FY22, EBITDA grew by ~7.2% YoY to ₹8,440 cr.
EBITDA growth remained subdued despite higher
sales due to higher operating cost.
In Q3 FY22, EBITDA de-grew by 22% YoY from ₹3,102
cr in Q3 FY21 to ₹2,419 cr majorly due to increase in
power & fuel expenses. On a sequential basis, it de-
grew by 10.9%.

5 Year CAGR: 18.7%

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DHD PAT GROWTH

In FY21, PAT de-grew by 7.6% YoY. The company had
applied the lower income tax rates on the deferred tax
assets/liabilities to the extent these are expected to
be realised or settled in the future period when the
company may be subjected to lower tax rate and
accordingly reversed net deferred tax liability of
₹2,110 cr for 31st March 2020.
The effective tax rate for FY21 was 31.87% as
compared to -10.18% in FY20.
In 9M FY22, PAT stood at ₹4,721 cr as compared to
₹3,688 cr in 9M FY21. The growth in PAT on YoY basis
was primarily due to higher operating profits and also
comprised an exceptional loss of ₹336 cr in Q2 FY21.
In Q3 FY22, PAT stood at ₹1,710 cr v/s ₹1,585 cr in Q3
FY21.

5 Year CAGR: 16.5%

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 GROWTH EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 PROFITABILITY
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DHD EBITDA MARGIN

The EBITDA margin of the company was 27.5% in FY21
which expanded primarily due to higher revenue and
lower power & fuel cost. Increased usage of
alternative fuels along with pro-active procurement
strategy helped the company to keep fuel cost static
despite increasing prices of coal/petcoke in
international markets.
In 9M FY22, EBITDA margin stood at ~24%.
For Q3 FY22, EBITDA margin was 19.2% as compared
to 27.4% in Q3 FY21. EBITDA margin declined on a YoY
basis, due to, hike in diesel, fuel and input material
prices. Logistics cost, energy cost and raw material
cost increased by 4%, 39% and 7% on a YoY basis,
respectively.

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DHD PAT MARGIN

In FY20, the PAT margin expanded due to reversal of
net deferred tax liability of ₹2,110 cr.

In FY21, the PAT margin contracted YoY, though as

compared to previous financial years it expanded
due to increased revenue from operations and lower
costs.

In 9M FY22, PAT margin stood at 12.8% as compared

to 11.7% in 9M FY21.

In Q3 FY22, PAT margin stood at 13.2%. It improved

by ~230 bps sequentially, due to one time gain of tax
in earlier years of ₹535 cr during Q3 FY22.

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 PROFITABILITY
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DHD ROCE
For FY21, the ROCE saw a meaningful improvement
due to increased operating profits.

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DHD ROE
The ROE of the company has been volatile over the
years.

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 PROFITABILITY EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 EFFICIENCY
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DHD CASH FLOWS

In FY21, net cash flow from operations (CFO) stood at
₹12,503 cr. The growth in CFO was primarily on
account of higher profits. Cash inflow from working
capital changes were ₹2,329 cr. The payment of taxes
was ₹1,291 cr.

Cash outflow from investing (CFI) in FY21 stood at

₹8,859 cr mainly on account of net investments of
₹7,241 and net purchase of property, plant &
equipment to the tune of ~₹1,839 cr.

Cash flow from financing (CFF) saw an outflow of

₹4,356 cr on account of net repayment of long-term
borrowings of ₹2,525 cr and interest charges of
₹1,430 cr.

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 EFFICIENCY
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WORKING
DHD CAPITAL CYCLE
In FY21, days of receivables and days of inventory
both reduced due to efficiency in collection process
and increase in turnover of the company which
resulted in decline of working capital days. Days of
payables have increased significantly over the years,
mainly on account of better credit terms and payment
through letter of credit.

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 EFFICIENCY
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DHD FREE CASH FLOW

In FY21, the free cash flow per share stood at ₹296.7.

The company had approved fresh capex of ₹5,477 cr

in FY21, towards increasing capacity by 12.8 MTPA.
The additional capacity will be created in the fast-
growing markets of East, Central and Northern
regions of the country.

The above expansion is in addition to the company’s

6.7 MTPA capacity expansion which were underway in
Uttar Pradesh, Odisha, Bihar and West Bengal.
Commercial production from these capacities are
expected to commence from FY22 and FY23.

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 EFFICIENCY
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ASSET
DHD TURNOVER RATIO
Asset turnover ratio in FY21 was 0.54x.
In FY19, total assets had increased on account of
inorganic expansion which led to increase in property
plant, & equipment, goodwill and other intangible
assets.
In FY21, the company had further invested in units of
debt schemes of various mutual funds classified as
current investments.

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 EFFICIENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 SOLVENCY
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DHD DEBT TO EQUITY

The company has been able to reduce leverage since
FY20.

The long-term and short-term borrowings stood at

₹13,548 cr and ₹4,235 cr in FY21.

In Q4 FY21, the company issued unsecured fixed rate

US Dollar denominated notes (in the form of
“Sustainability Linked Bonds”), aggregating to ₹2,924
cr, due on 16th February 2031, bearing coupon rate
of 2.8% per annum payable semi-annually.

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INTEREST
DHD COVERAGE RATIO
In FY21, interest cost declined by 24.8% YoY primarily
due to repayment of borrowings.

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DHD CURRENT RATIO

In FY21, the current ratio stood at 1.17x.
The current assets increased during the year
primarily on account of investments.
The current liabilities increased during the year
primarily on account of increase in trade payables,
current maturities of long-term debt and provision
for expenses and statutory liabilities.

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 SOLVENCY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 VALUATION
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DHD PE RATIO
Ultratech Cement Ltd. is currently trading at a TTM
PE multiple of 31.53x.
The company is the leading cement manufacturer in
India having a wide distribution network. These
factors provide comfort to the prospective growth
when the cement demand surges.

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DHD DIVIDEND YIELD

The company has been consistently paying dividends
since last few years.
In FY21, the company paid a final dividend of ₹37 per
share and the earnings per share (EPS) stood at
₹184.4 This translated into a dividend payout ratio
(DPR) of ~20% for the year.

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 VALUATION
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DHD KEY LEVELS

Ultratech Cement had been consolidating between
₹3300-₹4900 since the beginning of 2017. In the
panic sell off of Mar, 2020 it made a low of ₹2910.
Since then the stock has been on an uptrend, making
a high of ₹8269 in Nov, 2021.

₹6000-₹6250 zone is likely to act as a strong support

zone and can be used by long term investors for
accumulation.

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 VALUATION EDGE METER: 3
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 QUALITY
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DHD MANAGEMENT
Sustainable growth is the integral part of the
company’s business ethic. The management focuses
on to reduce carbon footprints, conservation of
natural resources and implementation of energy
efficiency measures. The company was a founding
member of Global Cement and Concrete Association.
It would focus on its cost leadership structure by
improving operational efficiency through cost savings
on key inputs, scaling up logistics backbone. The move
towards digitization to provide value to its internal and
external stakeholders.
It would also upgrade its existing facilities with
contemporary technology & new processes and
increase capacity to capitalize on growing markets.

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SHAREHOLDING
DHD PATTERN
Promoter’s stake has declined in last 9 quarters from
61.68% to 59.96%.
FII have reduced their stake since Q3 FY21 whereas
DII have increased their stake since the same time
period.
Grasim Industries Limited, promoter of the company
holds 57.28% shares of the company.
Top Public Shareholding: -
LIC of India 4.59%
SBI Arbitrage Opportunities Fund 1.40%
Kotak Balanced Advantage Fund 1.25%

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 QUALITY
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DHD SECTOR POTENTIAL

• The long-term outlook remains positive due to persistent infrastructure spending and low-cost housing initiative (Pradhan Mantri
Aawas Yojna) by Government of India (GOI) that might boost demand for cement.
• Rising income levels and per capita consumption would increase demand for housing and real estate which accounted ~55% of
cement consumption in FY21.
• The GOI launched the National Infrastructure Pipeline (NIP) in September 2019, thereby laying five-year plans for investments of
₹111 lakh crore in infrastructure creation (about 7,400 projects) by 2025 which aims to invest in projects across energy, social &
commercial infrastructure, communication, water and sanitation.
• The Bharatmala project encompasses 83,677 kilometer of road construction to interconnect 550 district headquarters (from
current 300) through a minimum 4-lane highway for an estimated project cost of ₹5.35 lakh crore. Infrastructure sector accounts
for ~22% of cement consumption in India after housing sector (~55%) in FY21.
• It has an oligopoly market where large players would benefit from pricing power. Additionally, the sector faces low threat from
substitutes.
• The GOI’s strong focus on infrastructure development for aiming 100 smart cities and expansion of railways would increase
construction activity, thus boosting cement demand.

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 QUALITY
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COMPETITIVE
DHD LANDSCAPE
The company is the largest cement manufacturer in
India with an installed capacity of 112.55 MTPA. It
has a pan India presence. The region wise capacity as
on FY21 was: West 27.7 MTPA, North 23.8 MTPA,
Central 23.3 MTPA, South 20.5 MTPA and East 16.1
MTPA. The company would become third largest
cement manufacturer in the world, outside of China
once their expansion plan of 19.5 MTPA gets
commissioned by end of FY23 and FY24, of which 3.2
MTPA have been installed, as on January 2022.
It holds a share of ~21% of installed cement capacity
in India and has better working capital days in
comparison to its peers. The company would
strategize consolidating its market presence in
existing geographies and expand in eastern, northern
and central Indian markets.

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DHD FUTURE OUTLOOK

• It expects cement demand to revive in the coming quarters as there has been pickup in government-led infrastructure and housing
projects.
• It had commenced its mining operations at its Bicharpur coal block situated in Madhya Pradesh.
• The company is committed to move to 100% renewable energy to meet its electrical energy requirement by FY50. It is on track to
achieve a green energy mix of 34% by FY24.
• By FY24, power capacity through WHRS would increase to 304 MW and the cost of this would constitute 25% to 26% of the total
power consumption. Cost per unit of WHRS is ~50 paise - 70 paise. Going forward, 25% of power would cost 75 paise per unit and
75% of power (thermal or grid) would cost ₹5 per unit.
• It expects the cost to remain elevated at the current levels for the coming quarters.
• The capex planned for FY22 would be ~ ₹4,000-₹5,000 crore, of which ~₹4,000 crore has already been spent till date, which would
be funded by internal accruals.
• The company would reduce its net debt, going forward.
• In December 2021, it was declared as the preferred bidder for the Ravur Limestone block, located in Karnataka, securing resources
of 708 million tonnes (MT) over an area of 7.13 sq kms.

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 QUALITY EDGE METER: 4
An Edge Meter is a graded measurement of certain aspects of a company on a scale of 1 to 5, 5 denoting the highest rating. Since
judgement on equity is subjective because different people will have different expectation from their investments, it is better to study
each aspect and give an individual grading to arrive at the final evaluation of a stock.
 FINAL
ABOUTEDGE
THE MATRIX
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DHD
Edge Meter Aspects Grade
Growth 3
Profitability 3
Efficiency 4
Solvency 4
Valuation 3
Quality 4
TOTAL 21

The maximum grade for a company could be 30. Any company above grade 20
is worth considering. A grade below 15 is considered to be poor.
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DHD

THANK YOU
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equity involves individual judgements, this analysis should be used for only learning enhancements and cannot be considered to
be a recommendation on any stock or sector. Our knowledge team has limited understanding and we all are learning the art and
science behind this.

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DISCLOSURES
DHD
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Neither Kredent Infoedge P Ltd. nor any of its associates have actual/beneficial ownership of one percent or more securities of the subject company, at the end of
the month immediately preceding the date of publication of the research report or date of the public appearance.
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public appearance.
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banking or brokerage services from the subject company in the past twelve months.
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