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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
80
90
100
110
120
130
140
150
160
04-2
016
07-2
016
10-2
016
01-2
017
04-2
017
07-2
017
10-2
017
01-2
018
04-2
018
07-2
018
10-2
018
01-2
019
Ultratech Sensex
*
Ultratech Cement Ltd. | Q4FY19 - Result Update | Page 2
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.
Source: Company, NSPL Research
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
Ultratech Cement Ltd. | Q4FY19 - Result Update | Page 3
Sales Volume
Realization per ton
EBITDA/Ton
Source: Company, NSPL Research
11
.5
13
.7
13
.2
11
.18
11
.73
14
.07
13
.19
13
.14
15
.85
18
.47
17
.5
15
.7
18 21
.3
-5%
0%
5%
10%
15%
20%
25%
30%
35%
40%
0
5
10
15
20
25
Q3
FY1
6
Q4
FY1
6
Q1
FY1
7
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
%
Mill
ion
To
ns
Sales Volume % change y-o-y
3661
4322
4684
4882
4782
4620
5333
5184
4789
4803
5006
5192
4896
4930
0
1000
2000
3000
4000
5000
6000
Q3
FY1
6
Q4
FY1
6
Q1
FY1
7
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
INR
/To
n
Realization per ton
444
908
1078
103
3
949
908
1237
102
1
841
922
886
835
772
103
9
0
200
400
600
800
1000
1200
1400
Q3
FY1
6
Q4
FY1
6
Q1
FY1
7
Q2
FY1
7
Q3
FY1
7
Q4
FY1
7
Q1
FY1
8
Q2
FY1
8
Q3
FY1
8
Q4
FY1
8
Q1
FY1
9
Q2
FY1
9
Q3
FY1
9
Q4
FY1
9
INR
/To
n
EBITDA/tonne
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
Ultratech Cement Ltd. | Q4FY19 - Result Update | Page 4
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
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
Ultratech Cement Ltd. | Q4FY19 - Result Update | Page 5
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 - - -
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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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;
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Details of Nalanda Securities Pvt. Limited (NSPL)
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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
Has research analyst or NSPL or its associates received any compensation
for investment banking or merchant banking or brokerage services from
the subject company in the past 12 months
NO
Has research analyst or NSPL or its associates received any compensation
for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past 12
months
NO
Has research analyst or NSPL or its associates received any compensation
or other benefits from the subject company or third party in connection
with the document.
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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
Ultratech Cement Ltd. | Q4FY19 - Result Update | Page 7
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