april 25, 2019 ultratech cement ltd. - nalanda …...q4fy19 – e april 25, 2019 ultratech cement...

Q4

FY1

9 –

Re

sult

Up

dat

e

April 25, 2019

Ultratech Cement Ltd. Downside

Scenario

Current

Price

Price

Target

485010%

Upside

Scenario

BUY

4400Q4FY19 Result Update

Volumes surprise street estimates, reported better than expected numbers

Ultratech reported standalone volume growth of 15.3% y-o-y to 21.3mt in

Q4FY19. Operating leverage coupled with strong demand led to standalone

EBITDA growth of 30% y-o-y and 51.6% q-o-q to INR 2213 crore. Low cost housing

and construction demand led to volume off take across industry.

Realization remained a miss, EBITDA/ton improved sharply led by volumes

Blended realizations grew by 2.6% y-o-y and 0.6% q-o-q to INR 4930/ton inQ4FY19. With price hikes on all India basis of INR 20-25 kg per bag we expectedthe realization to remain strong around high single digits. We believe recent pricehikes full impact will be seen in Q1FY20E.

EBITDA grew by 31.0% y-o-y and 60.5% q-o-q to INR 2332 crore in Q4FY19.

EBITDA margins for the quarter inclined by staggering 220 bps y-o-y and 580 bps

q-o-q to 21.38%. Standalone EBITDA per ton grew by 16.8% y-o-y to INR 1039/ton

owing to strong rise in volumes of 15.3% y-o-y.

Recent M&A’s started reaping positive benefits, full benefits to see by FY21E

Nathdwara cement (erstwhile Binani Cement) has reported 72% utilization for

FY19. It reported volumes of 9.75 lakh tonnes and EBITDA/ton of INR 830/ton.

Management guided that INR 30/ton cost reduction will be done by FY20E. With

the commissioning of Barra grinding unit and post acquisition of Century Textiles

cement assets, Ultratech’s capacity will increase to 113.5mt . With an estimated

total industry capacity of 480mt, this translates to ~23.5% of capacity share.

Valuations

We foresee a significant pickup in cement demand in the next two to three years

and expect a growth rate higher than the industry incremental capacity addition.

Ultratech, being a pan-India market leader, is expected to benefit the most from

the same. With an increasing number of WHRS plants commissioned, higher

proportion of AFRs used, as well as greenfield and brownfield expansions at

strategic locations, we expect the increasing variable costs to be rationalized. We

assign a target price of INR 4850/share giving an upside of 10% (at an average of

15x FY21 EV/EBITDA and $175 FY21 EV/Ton). We suggest to ADD the stock on

dips (we believe the stock is fairly valued at the current juncture) for an

investment horizon of 1 year as we believe post election results there will be

heavy thrust on infrastructure and housing projects.

Market Data

Industry Cement

Sensex 39246

Nifty 11786

Bloomberg Code UTCEM:IN

Eq. Cap. (INR Crores) 274.6

Face Value (INR) 10

52-w H/L 4679/3260

Market Cap (INR Crores) 126775

Valuation Data FY19 FY20E FY21E

P/E (x) 43 36 26

EV/EBITDA (x) 18 16 13

EV/Ton ($) 191 173 165

Ultratech Vs SENSEX

Mar’19 Dec’18 Mar’18

Promoters 61.69 61.69 61.98

FIIs 20.00 20.38 22.27

DIIs 7.83 7.62 5.81

Retail 10.48 10.31 9.94

100.0 100.0 100.0

Shareholding Pattern

(INR Crores) FY17 FY18 FY19 FY20E FY21E

Revenue 25,375 31,411 37,379 43,881 50,204

Growth% 24% 19% 17% 14%

EBITDA 5,212 6,145 6,788 8,501 10,350

Growth% 18% 10% 25% 22%

Adjusted PAT 2,715 2,222 2,432 3,308 4,700

Growth% -18% 9% 36% 42%

EPS (INR) 99 81 89 121 171

EV/EBITDA 22 20 18 16 13

EV/Tonne 260 216 191 173 165

P/E (x) 43 49 43 36 26

Institutional Research

* Read last page for disclaimer & rating rationale

Source: Company, NSPL Research

HEAD OF RESEARCHVaibhav ChowdhryVaibhav.Chowdhry@ nalandasecurities.com

NALANDA SECURITIES PRIVATE LIMITED310-311 Hubtown Solaris, NS Phadke Marg, Opp Teli Gali, Andheri East, Mumbai 69+91-22-6281-9649 | [email protected] | www.nalandasecurities.com

ASSOCIATEAditya Khetanaditya.khetan@ nalandasecurities.com

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Ultratech Sensex

*

mailto:[email protected]


Ultratech Cement Ltd. | Q4FY19 - Result Update |

Consolidated Q4FY19 Result Analysis

(INR Crores) Q4FY19 Q3FY19 Q4FY18 Y-o-Y Q-o-Q

Revenue 10905 9337 9290 17.4% 16.8%

COGS 2093 1653 1621 29.1% 26.7%

Employee Expenses 502 529 445 12.8% -5.0%

Power and Fuel 2257 2200 2002 12.8% 2.6%

Freight and Forwarding 2442 2211 2286 6.8% 10.4%

Other Expenses 1278 1290 1156 10.6% -1.0%

Total Expenses 8573 7883 7510 14.2% 8.7%

EBITDA 2332 1453 1781 31.0% 60.5%

Depreciation 547 550 501 9.3% -0.4%

Other Income 126 105 111 13.4% 20.7%

EBIT 1911 1008 1391 37.4% 89.6%

Finance Cost 434 412 349 24.3% 5.4%

PBT 1477 596 1042 41.8% 147.7%

Exceptional Items 0 0 -315

PBT 1477 596 727 103.3% 147.7%

Taxes 463 184 280 64.9% 151.9%

Net Profit 1014 413 446 127.3% 145.8%

• The company’s consolidated net sales grew by 17.4% y-o-y and 16.8% q-o-q basis to INR 10905 crore in Q4FY19.• Standalone realizations grew by 2.6% y-o-y and 0.6% q-o-q to INR 4930/ton in Q4FY19.• Consolidated EBITDA grew by 31.0% y-o-y and 60.5% q-o-q to INR 2332 crore in Q4FY19. EBITDA margins for the quarter

inclined by staggering 220 bps y-o-y and 580 bps q-o-q to 21.38%.• Standalone EBITDA grew by 30% y-o-y and 59.2% q-o-q to INR 2213 crore. Standalone EBITDA per ton grew by 16.8% y-o-y to

INR 1039/ton owing to strong rise in volumes of 15.3% y-o-y.• Consolidated PAT grew by 127.3% y-o-y and 145.8% q-o-q to INR 1014 crore in Q4FY19. PAT margins for the quarter stood at

9.3% in Q4FY19 as compared to 4.8% in Q4FY18.• Standalone volumes (including Nathdwara cement) grew by robust 15.3% to 21.3mt in Q4FY19.

Standalone (INR/Ton) Q4FY19 Q3FY19 Q4FY18 Y-o-Y Q-o-Q

Realization 4930 4896 4803 2.6% 0.7%

RM Cost 1020 839 801 27.4% 27.5%

Employee Cost 216 274 227 -4.6% -21.0%

Power and Fuel 962 1127 1028 -6.4% -14.7%

Freight and Forwarding 1139 1211 1232 -7.5% -6.0%

Other Expenditure 553 673 595 -6.9% -17.7%

EBITDA 1039 772 922 12.7% 28.1%

Key Concall Highlights• The company expects the annual capacity addition to be limited to 15-17mt over FY19-20E due to rising cost of new limestone

mines, expensive land acquisition, increasing costs & royalties etc. However, incremental demand is expected to be 20-25mtled by strong infra & housing demand. Accordingly, industry utilisations are seeing an uptick as seen in FY19.

• The capacity additions of JP in central are expected to be delayed by at least a quarter. The Bara expansion of 4mt is expectedto be commissioned by Q1FY21 as the JPA engineers are facing challenges with the same. However, JP assets are operating atpar and with strong demand this will lead to operating leverage and improvement in profitability.

• The overall lead distance for the company is 400 km. Also, if Nathdwara capacity ramps up then further improvement of 10 kmin lead distance can be assumed.

• Cumulative WHRS capacity stands at 86 MW as on FY19. There are plans to increase the WHRS capacity by taking the total to131 MW by FY21E. Overall renewables and WHRS will cumulatively account for more than 20% of power cost by FY21E.

• Debt repayment of INR 535 crore is due in FY20E and INR 2300 crore debt servicing of JP assets will start from FY22E.Management stated they are looking at net debt to EBITDA of 2x by FY21E. Current net debt to EBITDA is 2.5x.









Sales Volume

Realization per ton

EBITDA/Ton


11

.5

13

.7

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.2

11

.18

11

.73

14

.07

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.19

13

.14

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.85

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.47

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.5

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.7

18 21

.3

-5%

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25%

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0

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25

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FY1

6

Q4

FY1

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Q2

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Q3

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Q2

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Q4

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FY1

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%

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ns

Sales Volume % change y-o-y

3661

4322

4684

4882

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4620

5333

5184

4789

4803

5006

5192

4896

4930

0

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INR

/To

n

Realization per ton

444

908

1078

103

3

949

908

1237

102

1

841

922

886

835

772

103

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INR

/To

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EBITDA/tonne







Consolidated Profit & Loss (INR Crores) FY17 FY18 FY19E FY20E FY21E

Net sales 25,375 31,411 37379 43881 50204

COGS 4493 5289 6527 7250 8383

Employee Expenses 1522 1810 2059 2573 2831

Power and fuel 4272 6334 8428 10091 11553

Transportation cost 5903 7310 8847 10225 11707

Other Expenses 3992 4561 4731 5241 5381

EBITDA 5,212 6,145 6788 8501 10350

D&A 1,348 1,848 2140 2255 2273

Other income 648 584 438 600 600

EBIT 4,512 4,881 5086 6846 8677

Interest Expense 640 1,233 1549 1909 1663

PBT 3,872 3,648 3538 4937 7014

Tax 1,159 1,077 1107 1629 2315

PAT 2,715 2,222 2432 3308 4700

Consolidated Balance Sheet (INR Crores) FY17 FY18 FY19E FY20E FY21E

Share Capital 274.5 274.6 275 289 289

Reserves & Surplus 24,117 26,107 28,114 31,025 35,160

Shareholder's Funds 24,392 26,381 28,388 31,313 35,449

Minority Interest 10 16 12 16 16

Long-term borrowings 6,371 15,863 19,551 20,551 17,551

Deferred Tax Liabilities 3,345 3,626 3,554 3,554 3,554

Other long-term liabilities 37 7 6 16 18

Long term provisions 290 369 166 507 587

Non-current liabilities 10,043 19,865 23,278 24,628 21,710

Short-term borrowings 1,079 2,763 2,724 2,724 2,724

Trade payables 1,857 2,504 2,846 3,178 3,675

Other current liabilities 4,670 5,315 5,891 7,250 8,383

Short-term provisions 168 312 1,397 1,397 1,397

Current liabilities 7,775 10,895 12,857 14,549 16,178

Total Equity and Liabilities 42,219 57,158 64,536 70,506 73,353

Goodwill on consolidation 1,085 1,036 2,847 2,847 2,847

Gross Block 39,123 55,421 58,421 64,435 64,935

Less: Accum. Depreciation 13,383 15,230 17,275 19,530 21,803

Net Fixed Assets 25,740 40,190 44,411 44,904 43,131

Non-current investments 1,280 1,498 1,405 1,405 1,405

Long term loans and advances 789 2,965 4,118 4,118 4,118

Non-current Assets 28,893 45,689 52,781 53,274 51,501

Current investments 5,411 3,949 1,516 1,516 1,516

Inventories 2,401 3,268 3,585 3,972 4,593

Trade receivables 1,757 2,228 2,531 2,164 2,476

Cash and cash equivalents 2,249 219 707 4,940 8,290

Short-term loans and advances 1,472 1,728 1,095 2,320 2,657

Other Current Assets 35.95 76.56 2,320 2,320 2,320

Current Assets 13,326 11,468 11,755 17,232 21,852

Total Assets 42,219 57,158 64,536 70,506 73,353








RATIOS FY17 FY18 FY19E FY20E FY21E

Particulars

EBITDA/Ton 1038.5 1046.5 934 1063 1142

Sales Volume (mn tons) 50.2 58.7 73 80 91

Growth (%)

Total Sales 5.3% 23.8% 19% 17% 14%

EBITDA 13.8% 17.9% 10% 25% 22%

PAT 27.0% -18.1% 9% 36% 42%

Profitability (%)

EBITDA Margin 20.5% 19.6% 18.2% 19.4% 20.6%

NPM 10.7% 7.1% 6.5% 7.5% 9.4%

RoE (%) 11.1% 8.4% 8.6% 10.6% 13.3%

RoCE (%) 13.1% 10.6% 9.8% 12.2% 15.2%

Debt Ratios

Net Debt/EBITDA 0.0 2.4 3 2 1

Net Debt/Equity 0.0 0.5 1 1 0

Interest Coverage 7.0 4.0 3 4 5

Per share data / Valuation

EPS (INR.) 99.1 81.0 89 121 172

P/E (INR.) 42.8 48.9 43 36 26

EV/EBITDA (x) 22.2 20.0 18 16 13

EV/Ton ($) 259.8 216.3 191 173 165

Consolidated Cash Flow (INR Crores) FY17 FY18 FY19E FY20E FY21E

PBT 3,872 3,302 3,538 4,937 7,014

Depreciation & Amortization 1,348 1,848 2,140 2,255 2,273

(Incr)/Decr in Working Capital 529 -1,248 6,790 9,916 11,391

Direct Taxes Paid -744 -843 -1,179 -1,629 -2,315

Cash Flow from Operating 5,005 3,888 5,611 8,287 9,076

(Incr)/ Decr in Gross PP&E -1,398 -2,097 -7,201 -2,749 -500

Cash Flow from Investing -2,480 1,857 -6,579 -2,749 -500

(Decr)/Incr in Debt -1,615 -4,207 3,649 1,000 -3,000

Dividend -312 -334 -502 -397 -564

Finance costs -614 -1,205 -1,549 -1,909 -1,663

Cash Flow from Financing -2,535 -5,730 1,598 -1,306 -5,227

Incr/(Decr) in Balance Sheet Cash -10 14 630 4,233 3,350

Cash at the Start of the Year 90 59 77 707 4,940

Cash at the End of the Year 59 77 707 4,940 8,290

Bank Balances not Included in Cash 2190 141 - - -







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Disclaimer:This report has been prepared by Nalanda Securities Pvt. Ltd(“NSPL”) and published in accordance with the provisions of Regulation 18 of the Securities and Exchange Board of India(Research Analysts) Regulations, 2014, for use by the recipient as information only and is not for circulation or public distribution. NSPL includes subsidiaries, group and associatecompanies, promoters, directors, employees and affiliates. This report is not to be altered, transmitted, reproduced, copied, redistributed, uploaded, published or made available toothers, in any form, in whole or in part, for any purpose without prior written permission from NSPL. The projections and the forecasts described in this report are based upon anumber of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. Projections and forecasts are necessarily speculative in nature, and itcan be expected that one or more of the estimates on which the projections are forecasts were based will not materialize or will vary significantly from actual results and suchvariations will likely increase over the period of time. All the projections and forecasts described in this report have been prepared solely by authors of this report independently.None of the forecasts were prepared with a view towards compliance with published guidelines or generally accepted accounting principles.This report should not be construed as an offer to sell or the solicitation of an offer to buy, purchase or subscribe to any securities, and neither this report nor anything containedtherein shall form the basis of or be relied upon in connection with any contract or commitment whatsoever. It does not constitute a personal recommendation or take into accountthe particular investment objective, financial situation or needs of individual clients. The research analysts of NSPL have adhered to the code of conduct under Regulation 24 (2) ofthe Securities and Exchange Board of India (Research Analysts) Regulations, 2014. The recipients of this report must make their own investment decisions, based on their owninvestment objectives, financial situation or needs and other factors. The recipients should consider and independently evaluate whether it is suitable for its/ his/ her/their particularcircumstances and if necessary, seek professional / financial advice as there is substantial risk of loss. NSPL does not take any responsibility thereof. Any such recipient shall beresponsible for conducting his/her/its/their own investigation and analysis of the information contained or referred to in this report and of evaluating the merits and risks involved insecurities forming the subject matter of this report. The price and value of the investment referred to in this report and income from them may go up as well as down, and investorsmay realize profit/loss on their investments. Past performance is not a guide for future performance. Actual results may differ materially from those set forth in the projection.Except for the historical information contained herein, statements in this report, which contain words such as ‘will’, ‘would’, etc., and similar expressions or variations of such wordsmay constitute ‘forward‐looking statements’. These forward‐looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differmaterially from those suggested by the forward‐looking statements. Forward‐looking statements are not predictions and may be subject to change without notice. NSPL undertakesno obligation to update forward‐looking statements to reflect events or circumstances after the date thereof. NSPL accepts no liabilities for any loss or damage of any kind arising outof use of this report.This report has been prepared by NSPL based upon the information available in the public domain and other public sources believed to be reliable. Though utmost care has beentaken to ensure its accuracy and completeness, no representation or warranty, express or implied is made by NSPL that such information is accurate or complete and/or isindependently verified. The contents of this report represent the assumptions and projections of NSPL and NSPL does not guarantee the accuracy or reliability of any projection,assurances or advice made herein. Nothing in this report constitutes investment, legal, accounting and/or tax advice or a representation that any investment or strategy is suitable orappropriate to recipients’ specific circumstances. This report is based / focused on fundamentals of the Company and forward‐looking statements as such, may not match with areport on a company’s technical analysis report. This report may not be followed by any specific event update/ follow‐up.

Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter;

Disclosure of Interest Statement

Details of Nalanda Securities Pvt. Limited (NSPL)

• NSPL is a Stock Broker registered with BSE, NSE and MCX ‐ SX in all the major

segments viz. Cash, F & O and CDS segments. Further, NSPL is a Registered

Portfolio Manager and is registered with SEBI

• SEBI Registration Number: INH000004617

Details of Disciplinary History of NSPL No disciplinary action is / was running / initiated against NSPL

Research analyst or NSPL or its relatives'/associates' financial interest in

the subject company and nature of such financial interest

No (except to the extent of shares held by Research analyst or NSPL or its

relatives'/associates')

Whether Research analyst or NSPL or its relatives'/associates' is holding

the securities of the subject companyNO

Research analyst or NSPL or its relatives'/associates' actual/beneficial

ownership of 1% or more in securities of the subject company, at the

end of the month immediately preceding the date of publication of the

document

NO

Research analyst or NSPL or its relatives'/associates' any other material

conflict of interest at the time of publication of the documentNO

Has research analyst or NSPL or its associates received any compensation

from the subject company in the past 12 monthsNO

Has research analyst or NSPL or its associates managed or co‐managed

public offering of securities for the subject company in the past 12 monthNO


for investment banking or merchant banking or brokerage services from

the subject company in the past 12 months

NO


for products or services other than investment banking or merchant

banking or brokerage services from the subject company in the past 12

months

NO


or other benefits from the subject company or third party in connection

with the document.

NO

Has research analyst served as an officer, director or employee of the

subject companyNO

Has research analyst or NSPL engaged in market making activity for the

subject companyNO

Other disclosures NO

Rating Legend

Strong Buy More than 15%

Buy 5% - 15%

Hold 0 – 5%

Reduce -5% - 0

Sell Less than -5%

Ultratech Cement Ltd.

Date CMP (INR) Target Price (INR) Recommendation

April 25, 2019 4400 4850 Buy

January 25, 2019 3790 4149 Buy

October 22, 2018 3610 4110 Buy

July 19, 2018 3857 4653 Strong Buy







april 25, 2019 ultratech cement ltd. - nalanda …...q4fy19 – e april 25, 2019 ultratech cement...

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