About the Company

UltraTech Cement Ltd. is the largest manufacturer of grey cement, Ready Mix Concrete (RMC), and white cement in India. It is also one of the crown jewels of the Aditya Birla Group, one of India’s leading Fortune 500 companies.

The company has a consolidated capacity of 117.35 Million (including Bara) Tonnes Per Annum (MTPA) of grey cement. UltraTech Cement has 23 integrated plants, 1 clinkerisation plant, 27 grinding units, and 7 bulk terminals post the Century merger. Its operations span across India, UAE, Bahrain, Bangladesh, and Sri Lanka. UltraTech Cement is also India’s largest exporter of cement reaching out to meet the demand in countries around the Indian Ocean and the Middle East.

In the white cement segment, UltraTech goes to market under the brand name of Birla White. It has a white cement plant with a capacity of 0.56 MTPA and 2 WallCare putty plants with a combined capacity of 0.8 MTPA. With 100+ Ready Mix Concrete (RMC) plants in 35 cities, UltraTech is the largest manufacturer of concrete in India. It also has a slew of speciality concretes that meet the specific needs of discerning customers.

Q2 FY22 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q2FY22 Q2FY21 YoY % Q1FY22 QoQ % H1FY22 H1FY21 YoY%
Sales 11690 10165 15.00% 11693 -0.03% 23384 17835 31.11%
PBT 1946 1778 9.45% 2515 -22.62% 4461 2950* 51.2%
PAT 1300 1209 7.53% 1681 -22.67% 2981 2014 48.01%
Consolidated Financials (In Crs)
  Q2FY22 Q2FY21 YoY % Q1FY22 QoQ % H1FY22 H1FY21 YoY%
Sales 12157 10522 15.54% 12035 1.01% 24192 18472 30.97%
PBT 1948 1733 12% 2526 -22.88% 4474 2887** 55%
PAT 1319 1167 13% 1709 -22.82% 3010 1960 53.57%

*Contains exceptional item loss of Rs 157 Cr

** Contains exceptional item loss of Rs 222 Cr

Detailed Results:

  1. The company had a decent quarter with consolidated revenues rising 15% YoY while QoQ profits declined 23% despite flat QoQ revenue growth.
  2. Sales volumes grew 8% YoY in Q2 while operating EBITDA increased 1% YoY.
  3. EBITDA margin was at 24% in Q1. EBITDA per ton was at Rs 1160.
  4. Current net debt stands at Rs 6336 Cr with net debt to EBITDA at 0.47.
  5. Changes in operating costs in Q2 is as follows:
    • Logistics: Up 7% YoY to Rs 1219/ton. Accounts for 31% of the total operating costs.
    • Energy: Up 17% YoY to Rs 1099/ton. Accounts for 28% of total operating costs.
    • Raw Materials: Up 13% YoY at Rs 518/ton. Accounts for 13% of total operating costs.
  1. Diesel Price higher by ~21% YoY which led to logistics costs rising 7% YoY.
  2. Energy cost rise of 17% YoY mainly due to a rise in petcoke/coal prices.
  3. Packing costs have risen 25% YoY.
  4. Consolidated ROCE was at 17.3% in Q2.

Investor Conference Call Details:

  1. Ultratech now has 4.4% of its fuel consumption from alternate fuels.
  2. The company saw an 8% YoY rise in grey cement volumes and a 70% YoY rise in white cement volumes.
  3. Ultratech has commissioned a 1.2 MTPA expansion in its Bengal & Bihar unit. It is an additional grinding unit that will source clinker from existing plants.
  4. The company’s Bicharpur coal block shall start mining operations from Q3 onwards.
  5. The management does not expect any issues regarding the import availability of coal. Domestic coal accounts for only 12-15% of its requirement and the rest is imported.
  6. The demand shall remain intact for the cement industry, but it will be enduring pricing pressures due to rising input costs according to the management.
  7. The management states that it does expect fuel costs to stay inflated in the near future.
  8. The company has done price increases of Rs 10-15 in October on all of its products.
  9. The company requires around 12 million tons of coal each year and the Bicharpur block is expected to yield less than 1 million tons each year.
  10. The lead distance in Q2 was around 425 km.
  11. The trade mix in Q2 was at 67-69%.
  12. The management states that if Ultratech doesn’t maintain a 6-8% capacity CAGR it will start losing market share in the future.
  13. The management states that it doesn’t expect any major surprise in capex requirements despite the rapid rise in steel prices in the recent past.
  14. Normalcy should come back to coal procurement for the cement industry according to the management.
  15. Ultratech will be looking to mitigate any shortfall in domestic coal procurement through grid power and a rise in imported coal.
  16. The management expects fuel costs to rise by Rs 200 per ton by Q3 due to the way spot prices are rising currently.
  17. Imported coal and petcoke have become equally competitive in terms of costs for Ultratech but the procurement ratio is dependent on availability and fuel source security according to the management.
  18. On average, cement prices have gone up 4-5% YoY on an all-India basis for the cement industry. Central & South zones have stayed flat YoY while North & East have risen 2-3% YoY with the West rising 5-7% YoY in Q2.
  19. FY22 & FY23 should see good demand coming from UP due to state elections according to the management.
  20. The export operations are expected to become better as the company expects to see good revenue growth in Sri Lanka which has removed price control on cement recently.
  21. The management states that the company is planning for a 20 MTPA inorganic expansion in FY22 and a 15 MTPA inorganic expansion in FY23. Beyond that, the rate of acquisitions should slow down.

Analyst’s View:

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding to the company’s ever-growing market presence and reach in the country. Ultratech has had a decent quarter with sales growth of 15% but EBITDA/ton has fallen sharply to near Rs 1100, due to a rise in power & fuel costs. The company is looking to maintain a steady rate of capacity expansion through both organic and inorganic means. It is looking to pass on the price increases from input costs and the management expects industry demand to grow 6-8% in FY22 despite input cost inflation pressure. It remains to be seen how long the input cost inflation will go on and whether the rise in cement & steel prices will hurt the demand for construction & infrastructure development more than anticipated. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.

 


 

Q1 FY22 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY22 Q1FY21 YoY % Q4FY21 QoQ %
Sales 11693 7670 52.45% 14050 -16.78%
PBT 2515 1172* 114.59% 2643 -4.84%
PAT 1681 806 108.56% 1778 -5.46%
Consolidated Financials (In Crs)
Q1FY22 Q1FY21 YoY % Q4FY21 QoQ %
Sales 12034 7950 51.37% 14466 -16.81%
PBT 2527 1153* 119% 2639 -4.24%
PAT 1700 793 114% 1774 -4.17%

*Contains exceptional item loss of Rs 157 Cr

Detailed Results:

  1. The company had a decent quarter with consolidated revenues rising 51% YoY and despite the QoQ decline of 17% in revenues, profits saw a QoQ decline of only 4%.
  2. Sales volumes grew 47% YoY in Q1 while operating EBITDA increased 49% YoY.
  3. EBITDA margin was at 30% in Q1. EBITDA per ton was at Rs 1689 which is the highest it has gone ever for Ultratech.
  4. Current net debt stands at Rs 5984 Cr with net debt to EBITDA at 0.44.
  5. Changes in operating costs in Q1 is as follows:
  • Logistics: Up 6% YoY to Rs 1187/ton. Accounts for 33% of the total operating costs.
  • Energy: Up 12% YoY to Rs 1019/ton. Accounts for 28% of total operating costs.
  • Raw Materials: Up 7% YoY at Rs 510/ton. Accounts for 14% of total operating costs.
  1. Diesel Price higher by ~28% YoY which led to logistics costs rising 6% YoY.
  2. Energy cost rise of 12% YoY mainly due to an increase in green power from 13.9% last year to 15.5% currently and rise in petcoke/coal prices.
  3. The company has plans to complete a capacity expansion of 19.5 MTPA by the end of FY23.
  4. Consolidated ROCE was at 16.6% in Q1.

Investor Conference Call Details:

  1. Capacity utilization in Q1 was at 73% with the North Zone at 75%+, South at 50%, West at 70%+, and East at 95%+ utilization levels.
  2. A new capacity of 3.2 MTPA in Central and East zones is expected to come up in the next quarter.
  3. The company had already completed the prepayment of Rs 5000 Cr of loans in July.
  4. RMC and white cement suffered due to the phased lockdowns.
  5. The 2.3-million-ton clinker facility taken from Jaypee is expected to be commissioned by March ’22.
  6. Rural cement consumption has risen in all zones as the trade sales channel rose to 70% of total sales.
  7. The announcement of new metro rail projects and other infra projects should keep industry demand up for a long time.
  8. The company prices rise 6-8% in Q1 with the South and East zones rising 10%, West rising 7-10% and North & Central zones rising 3-6% in prices.
  9. The price inflation trends in fuel are unpredictable and may rise from current levels.
  10. The price rise in Q1 should normalize as the monsoons set in according to the management.
  11. The company is only always carrying 45 days of inventory and is not looking to stock up on speculation of RM price rise.
  12. The management assures that there isn’t any adverse impact on limestone mining supply from the increase in capacity.
  13. Capex spending in Q1 was at Rs 1000 Cr while working capital went up by Rs 600-700 Cr.
  14. The rising cash flows from the absence of interest payments will be used for growth and shareholder returns according to the management.
  15. The Century brand transition has been completed.
  16. The company shouldn’t have any clinker shortage because of the proposed expansions in the East Zone as the Dalla clinker facility in the Central zone can be used to supply the East zone and the Hirmi expansion also has clinker facility expansion.
  17. Construction chemicals are still a very small part of the company’s operations and don’t have any meaningful impact on the company’s business currently.
  18. 65% of trade sales were from rural regions for Ultratech.
  19. The gross debt as of the end of Q1 was at Rs 19000 Cr.
  20. The company is looking to leverage digital technology like IoT and others to help streamline operations and narrow resource consumption for Ultratech which should help in cost savings.
  21. The demand and utilization will dip in Q2 due to the monsoons, but it should come back fast once the monsoons recede according to the management.
  22. Petcoke is around 17% of the current fuel mix for the company.
  23. The company does use Indian coal, but its use is limited to the South, Central, and East zones due to longer distances increasing coal prices of procurement making it unfeasible for the West and North Zones.
  24. The conversion cost of petcoke fuel has risen from $109 to $123 in Q1.
  25. 88% of power consumption is covered by captive means.
  26. The company has seen Century’s EBITDA/ton cross the Rs 1000 mark in Q1.
  27. The management is looking to conclude the divestment of international operations by March ’22.

Analyst’s View:

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding to the company’s ever-growing market presence and reach in the country. Ultratech has had a good quarter with sales growth of 50%+ and EBITDA/ton reaching its highest level in recent years at Rs 1689, despite the 2nd wave of COVID-19. The company has maintained a steady rate of debt repayment and has also done an additional prepayment of Rs 5000 Cr of loans in July. It is also looking to complete its planned expansion of 19.5 MTPA by FY23 end of which around 3.2 MTPA will come online in Q2. It remains to be seen how long the urban market will remain subdued due to COVID-19 and whether the new govt infra projects including new metro rail projects will keep industry demand consistently high. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.

 


 

Q4FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 14050 10584 32.75% 12092 16.19% 43977 41376 6.29%
PBT 2643 1445 82.91% 2303 14.76% 7896* 5220 51.26%
PAT 1778 2906** -38.82% 1550 14.71% 5342 5455** -2.07%

Consolidated Financials (In Crs)
Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 14466 11054 30.87% 12522 15.52% 45460 43081 5.52%
PBT 2639 1459 81% 2332 13.16% 7858*** 5183 51.61%
PAT 1774 3237**** -45% 1585 11.92% 5319 5751**** -7.51%

*Contains exceptional item loss of Rs 164 Cr

**Contains tax credit of Rs 1708 Cr in Q4FY20 & Rs 1154 Cr in FY20

*** Contains exceptional item loss of Rs 261 Cr

****Contains tax credit of Rs 2024 Cr in Q4FY20 & Rs 1488 Cr in FY20

Detailed Results

  1. The company had a very good quarter with consolidated revenues rising 31% YoY and PBT rising 81% YoY. PAT was down YoY due to high base last year due to a high tax credit at the time. PAT grew 61% YoY barring exceptional items.
  2. Sales volumes grew 28% YoY in Q4 while operating EBITDA increased 42% YoY.
  3. Operating margins improved 2% YoY to 26% in Q4.
  4. Capacity utilization in Q4 was at 93% in overall.
  5. Overall revenue growth in FY21 was 6% YoY while EBITDA grew 24% YoY and PBT grew 51% YoY.
  6. EBITDA margin for FY21 improved 4% YoY to 28%.
  7. The company reduced Rs 10,264 Cr of net debt in FY21. Current net debt stands at Rs 6717 Cr with net debt to EBITDA at 0.55 and net debt to equity at 0.15.
  8. Changes in operating costs in Q4 is as follows:
    • Logistics: Up 2% YoY to Rs 1176/ton. Accounts for 33% of the total operating costs.
    • Energy: Up 7% YoY to Rs 978/ton. Accounts for 27% of total operating costs.
    • Raw Materials: Up 4% YoY at Rs 520/ton. Accounts for 14% of total operating costs.
  1. Overall fixed costs have risen by 2% YoY in Q4.
  2. Diesel Price higher by ~22% YoY which led to logistics costs rising 2% YoY.
  3. Energy cost rise of 7% YoY mainly due to an increase in green power from 11.5% last year to 12.3% currently and rise in petcoke/coal prices.
  4. Consolidated ROCE & ROE came in at 15.3% & 15.6% respectively in FY21.
  5. The Board has recommended a final dividend of Rs 37 per share for FY21.

Investor Conference Call Highlights

  1. Capacity utilization was at 99% in March 2021.
  2. The company was dispatching nearly 9 million tons per month which are around 30% of total industry demand.
  3. Nathdwara Cement operated at 85% utilization while Century operated at near 90% utilization.
  4. Ultratech is targeting a reduction in carbon emissions by about 27% at the end of 2032 over the base of 2017.
  5. The company has no plans for international acquisitions currently and it will be pursuing many markets through organic expansion.
  6. All plants are multifuel and highly flexible on switching on an instantaneous basis from pet coke to coal or different grades of coals for Ultratech.
  7. Rural regions which have sustained demand during the past year have turned unpredictable due to localized lockdowns. Demand has dropped from the key states of Maharashtra and Gujarat due to this. But the management expects growth to come back soon in these areas.
  8. The management has stated that there is a lot of pending clean-up left in Nathdwara with many litigations going on. It expects to go ahead with the proposed merger once these issues are resolved by FY23.
  9. The company acquired assets of JP and is now required to pay royalties of Rs 200 Cr per year for limestone with these assets.
  10. RMC and building products are big growth drivers for Ultratech according to the management. It has also stated that customers are realizing the benefits of buying RMC instead of mixing RMC on site.
  11. The management expects to start working on the Dalla Super plant soon and is expecting it to be ready with a production capacity of 0.3 million tonnes of clinker by December.
  12. The 2nd line in the Bara plant has already been commissioned and has reached utilization of 70-75%.
  13. The management has stated that the company has shaved off fixed costs of near Rs 500 Cr from FY20.
  14. RMC revenues are up 32% YoY. The share of trade in sales mix was 67% in Q4 & 69% in FY21. The lead distance in the quarter was 440 km.
  15. Except for the West zone where the company will get restricted by CCI, it can do acquisitions in all other zones. The management is keen on the North-East and South Zones.
  16. Imported coal is around 20-25% cheaper than petcoke at current levels.
  17. There aren’t any price pressures on the long term govt projects since the govt is focused on project execution to maintain employment for many people.
  18. The management has stated that the prime driver of rising market share for Ultratech is the ability of the company to be able to supply cement to customers from its pan India network even when local plants are shut due to lockdowns.
  19. Today, the company has a total capacity of 125 MW of WHRS. It aims to reach 304 MW in WHRS by 2023 end or mid-2024. The total capex requirement for this is expected to be Rs 1800 Cr.
  20. The planned capacity in WHRS should be able to account for 25-26% of total power consumption.
  21. The current cost of power is just below Rs 5 per unit while after this planned WHRS comes in, around 25-26% of power will cost only Rs 0.75 per unit.
  22. Premium cement is around 10% of total volumes sold. The management expects this to go up to 15% in the future.
  23. The ROCE in the RMC business is above 25%.
  24. The EBITDA/ton from Nathdwara is around Rs 1500 while the figure from Century is around Rs 800.
  25. Capex for FY22 is expected to be around Rs 4000-5000 Cr while in FY23 it will come down to Rs 3000 Cr. This is largely for expansions.
  26. The company enjoys a market share of >25% in the UAE according to the management.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Ultratech has had a phenomenal quarter with sales growth of 30% and profit growth exceeding 61% YoY barring exceptional items. The company is doing well to focus on cash conservation and cost reduction while maintaining its steady pace of debt repayment. It has now managed to reduce by >Rs 10000 Cr in FY21 and has delivered net debt to EBITDA of 0.55 times. It remains to be seen how long the rural market will remain subdued due to COVID-19 and whether govt infra projects will continue to execute as normal during the 2nd wave of the pandemic. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.

 


 

Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 12092 10143 19.22% 10165 18.96% 29927 30784 -2.78%
PBT 2303 934 146.57% 1778 29.53% 5253 3775 39.15%
PAT 1550 643 141.06% 1209 28.21% 3565 2549 39.86%

 

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 12522 10608 18.04% 10522 19.01% 30994 32019 -3.20%
PBT 2331 997 133.80% 1462* 59.44% 4967** 3723 33.41%
PAT 1585 711 122.93% 896 76.90% 3274 2515 30.18%

*Contains exceptional item loss of Rs 336 Cr

**Contains exceptional item loss of Rs 493 Cr

Detailed Results

  1. The company had a very good quarter with consolidated revenues rising 18% YoY and PBT & PAT rising 134% YoY and 123% YoY respectively.
  2. Sales volumes grew 14% YoY in Q23 while operating EBITDA/ton increased 30% YoY to Rs 1330/ton.
  3. Operating margins improved 5% YoY to 26%.
  4. Capacity utilization in Q3 was at 75% in Century. Power consumption was reduced by 7% and production cost was reduced by 12% YoY. 72% brand transition was completed.
  5. In UltraTech Nathdwara, the plant is working at 45-75% capacity utilization. Production costs reduced by 15% YoY while EBITDA/ton was consistent at > Rs 1500/ton.
  6. The company reduced Rs 2696 Cr of net debt in Q3.
  7. Capacity utilization was at near 80% for the company. Selling price was down 1% QoQ. Production costs were down 1% QoQ.
  8. The company increased rural penetration by 3.5% YoY.
  9. Consolidated volume growth was at 14% YoY in Q3 and it fell by 4% YoY in 9MFY21.
  10. Fixed costs were brought down by 4% YoY.
  11. Changes in operating costs in Q3 is as follows:
    1. Logistics: Up 5% YoY to Rs 1178/ton. Accounts for 33% of the total operating costs.
    2. Energy: Down 3% YoY to Rs 952/ton. Accounts for 27% of total operating costs.
    3. Raw Materials: Flat YoY at Rs 501/ton. Accounts for 14% of total operating costs.
    4. Overall variable costs increased by 1% YoY in Q3.
  12. Diesel Price higher by ~10% YoY which led to logistics costs rising 5% YoY.
  13. Energy cost reduction of 3% YoY mainly due to an increase in green power from 11% last year to 13% currently and reduced power consumption by 2%.
  14. Absolute EBITDA grew 60% YoY. Consolidated EBITDA margins improved 7% YoY to 28% in Q3FY21.
  15. Net debt to EBITDA was at 0.73 times and net debt to equity was at 0.19 times.

Investor Conference Call Highlights

  1. Capacity utilization was 85% in December.
  2. Rebranding of Century should be done be Q2FY22 at the latest.
  3. Net debt stands at Rs 7973 Cr while current gross debt is at Rs 21000 Cr.
  4. ROE without goodwill has reached 14.1% and is expected to rise above 15% with new projects coming in.
  5. RMC is gaining good momentum for Ultratech. RMC generates incremental margins over cement and is also a high ROCE opportunity for Ultratech.
  6. Net sales of white cement segment are up 15% in Q3. This was driven by good volume performance and a strong price/mix with growth broad-based across categories and regions.
  7. White Cement grew about 13% while putty grew 18% in Q3.
  8. The company introduced new variants of Fragrance Putty which resulted in incremental growth in Putty segment.
  9. The management is not concerned about the entry of the parent Birla Group in the paints segment and is focussed on the cement sector only.
  10. The company is indeed looking to raise debt to refinance some of its existing debt at lower rates and take advantage of an opportunity for interest arbitrage.
  11. The Waste Heat Recovery System project is in full swing and is expected to get over by 3-4 months from its intended date.
  12. Pet coke prices are indeed at the high end currently and are not expected to rise much further.
  13. North & East zone have both grown more than 20% for the industry.
  14. The capacity utilization in South zone was in 70s while for the rest of India it was in the 80s.
  15. The management feels that demand will continue to outstrip incremental supply for the next 3-4 years for the cement industry.
  16. RMC sales were at Rs 620 Cr & white cement sales were at Rs 538 Cr in Q3.
  17. The company has to do minimal capex on distribution network as the transportation is entirely outsourced and acquiring dealers is easy for the company given its brand.
  18. 64% of sales were from trade channel.
  19. The company is seeing non-trade segment coming back well with the rise in urban real estate.
  20. The increase in pet coke prices will be reflected marginally in the next 2 quarters.
  21. The lead distance currently is close to 440 km. This has gone up mainly because the East zone was working at 100% capacity and the company had to source from other zones to service additional demand in the East zone.
  22. The company has no plans to hive off the white cement business at this point.
  23. The growth in RMC is directly linked to the rise in urban demand.
  24. White cement volumes sold in Q3 were at 3.9 lac tons.
  25. The management is insistent that the company will not be taking part in the paints business as the target customer set for the cement business and paints business are different. The distributor for Ultratech may start selling paints from Grasim but this will not involve Ultratech in any way.
  26. The total power generating capacity of Ultratech is 1100-1200 MW.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Ultratech has had a phenomenal quarter with sales growth of 19% and profit growth exceeding 100% YoY. The company is doing well to focus on cash conservation and cost reduction while maintaining its steady pace of debt repayment. It has also been restarting all the projects postponed by COVID and expects the Century brand transition to be completed in the next 2 quarters. It remains to be seen how long will uptick for infra and urban real estate will last and whether there is something in store for the infra and real estate sector in the upcoming Union Budget. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.

 


Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 10165 9446 7.61% 7670 32.53% 17835 20640 -13.59%
PBT 1778 951 86.96% 1172 51.71% 2950 2841 3.84%
PAT 1209 639 89.20% 806 50.00% 2014 1906 5.67%

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 10489 9762 7.45% 7913 32.55% 18402 21302 -13.61%
PBT 1465* 890** 64.61% 1157 26.62% 2622*** 2783 -5.79%
PAT 899 579 55.27% 796 12.94% 1695 1860 -8.87%

*Contains exceptional item loss of Rs 336 Cr

**Contains exceptional item loss of Rs 157 Cr

***Contains exceptional item loss of Rs 493 Cr

Detailed Results

  1. The company had a decent quarter with consolidated revenues rising 7.5% YoY and PBT & PAT rising 65% YoY and 55% YoY respectively.
  2. Effective volumes grew 20% YoY in Q2 while operating EBITDA/ton increased 30% YoY to Rs 1387/ton.
  3. Operating margins improved 6% YoY to 27%.
  4. Capacity utilization in Q2 was at 68% in Century. Increased pet-coke usage to 74% vs 73% in the last quarter. Variable Costs reduced by 12% YoY.
  5. In UltraTech Nathdwara, the plant is working at 60% capacity utilization. Production costs reduced by 17% YoY while EBITDA/ton was consistent at > Rs 1500/ton.
  6. The company reduced Rs 2519 Cr of net debt to Rs 12132 Cr as of 30th Sep 2020.
  7. Consolidated volume growth was at 19% YoY in Q2 and it fell by 3% YoY in H1.
  8. The penetration in rural markets has also increased by 5% YoY. Blended cement sales increased by 3% YoY and now account for 71% of sales.
  9. Fixed costs were brought down by 14% YoY.
  10. Changes in operating costs in Q1 is as follows:
    1. Logistics: Up 1% YoY to Rs 1140/ton. Accounts for 33% of the total operating costs.
    2. Energy: Down 9% YoY to Rs 937/ton. Accounts for 27% of total operating costs.
    3. Raw Materials: Up 3% YoY to Rs 505/ton. Accounts for 15% of total operating costs.
    4. Overall variable costs reduced by 6% YoY in Q2.
  11. Diesel Price higher by ~14% YoY which led to logistics costs rising 1% YoY.
  12. Energy cost reduction of 9% YoY mainly due to an increase in green power from 9% last to 13% currently.
  13. Absolute EBITDA grew 35% YoY. Consolidated EBITDA margins improved 6% YoY to 28% in Q2FY21.
  14. Net debt to EBITDA was at 1.11 times and net debt to equity was at 0.27 times.

Investor Conference Call Highlights

  1. Over 50% of the rural districts have shown growth over their past few performances. Migrant Labour is coming back to cities.
  2. Tier 1 towns are seeing opening up of real estate markets.
  3. Housing demand is definitely showing green shoots with cheap housing loans driving the demand.
  4. Eastern and Central markets are running at near full capacity with solid demand.
  5. Due to pet coke prices rising to $100, most of the cement industry is switching to alternate high calorific value coal.
  6. Century Cement has been fully integrated. The company is now looking to invest in 20 megawatts of WHRS at Maihar and Manikgarh, 2 of the units of Century, which will result in further cost reduction and improvement in EBITDA/ton. These projects are scheduled to get commissioned by March ’22.
  7. Most of the company’s capex plans, in West Bengal, Bihar, and the greenfield Cuttack plant, have gotten delayed due to COVID-19. These are expected to be completed in FY22.
  8. The management expects the company to reach debt to EBITDA of 1 time by the end of FY21.
  9. Despite industry decline, the company has managed to increase its sales volumes mainly due to better internal coordination and the ability to service all orders that came in for them.
  10. The management expects the company to maintain a higher growth pace than the industry going forward.
  11. There was a reduction of 14% in overhead costs in H1. Around 4% of this is expected to go away as it represented ad spending which will increase as compared to Q1 when all marketing activity was suspended.
  12. The company is gaining market share in white cement. Total revenues from RMC were about Rs 434 Cr. White cement was around the same figure. The management has stated that it is difficult to gauge market share in RMC due to widespread market fragmentation.
  13. The company will not be doing higher dividend pay-out as the management expects the cement industry to grow fast and the company will require additional cash to be able to outpace industry growth.
  14. The company I seeing improvement in Gujarat demand after a very long time.
  15. The company has already started using international coal as a substitute for expensive pet coke.
  16. The company is not reducing the credit period but it is also not allowing any extra slack in it.
  17. The management expects to maintain negative working capital in H2 as well.
  18. The management is confident that it will not see any shortage of clinker in the East India units and can even resort to transporting volumes from South units to cover additional demand if the need arises.
  19. Capacity utilization had risen to 75% in the month of September.
  20. White cement volume in Q2 was at 330,000 tonnes.
  21. Capex spending in H1 was at Rs 450 Cr. The total capex for Fy21 is expected to be at Rs 1200-1300 Cr. The reduction from the targeted Rs 1500 Cr is mainly due to labour shortage at most project sites.
  22. The company will start work on the 3.5 million tonne Pali unit next year. this unit is expected to be commissioned by Oct-Dec ’22.
  23. The rural market has helped pick up much of the slack from the decline in urban markets for the company.
  24. The management expects volume growth for the industry to be positive despite the massive decline in Q1.
  25. The company is expected to have capacity utilization of around 80-85% in October.
  26. The West Zone has been the lowest growth market YoY for the company. The company has managed to see some marginal growth in the South zone despite industry decline in the region.
  27. 71% of volumes for the company come from retail. Around 35-40% of these volumes come from rural markets.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Despite a fall in volumes in Q1, the company was able to bounce back quickly and achieve volume growth in Q2 despite industry decline. The company is doing well to focus on cash conservation and cost reduction after the disruption caused by COVID-19 while maintaining its pace of debt repayment. It remains to be seen how long will it take for demand to normalize for the industry and when will demand come back to the institutional side and urban areas where demand has fallen the most. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors


 

Q1FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 7670 11194 -31.48% 10583 -27.53%
PBT 1172** 1890 -37.99% 1445* -18.89%
PAT 806 1267 -36.39% 2906 -72.26%

 

Consolidated Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 7913 11554 -31.51% 10943 -27.69%
PBT 1157** 1893 -38.88% 1462^ -20.86%
PAT 796 1281 -37.86% 3239 -75.42%

*Contains deferred tax credit of Rs 1708 Cr

^Contains deferred tax credit of Rs 2024 Cr

**Contains an exceptional item of loss of Rs 157 Cr

 


Detailed Results

    1. The company had a dismal quarter with consolidated revenues declining 32% YoY and PBT declining 39% YoY.
    2. Effective volumes declined 22% YoY in Q1 while EBITDA/ton increased 12% YoY to Rs 1651/ton.
    3. The company reduced Rs 2209 Cr of net debt to Rs 14651 Cr as of 30th June 2020.
    4. Working capital turned negative with a change of Rs 789 Cr QoQ.
    5. Century Cement had utilization of >70% in May & June.
    6. Increased pet-coke usage to 73% vs 69% in the last quarter. Costs reduced by Rs 105/ton vs Q4FY20.
    7. Century Cement achieved EBITDA/ton of > Rs 900 in Q1.
    8. Ultratech Nathdwara con-core assets disposal to be completed by August 2020 and proceeds to be used to reduce company debt.
    9. Operating margins improved 1% YoY to 28% in Q1FY21.
    10. Net debt to EBITDA reduced to 1.44 times.
    11. Retail volume share has improved 13% YoY. The penetration in rural markets has also increased by 13% YoY. Blended cement sales increased by 11% YoY and now account for 78% of sales.
    12. Fixed costs were brought down by 21% YoY.
    13. Changes in operating costs in Q1 is as follows:
      1. Logistics: Declined 5% YoY to Rs 1116/ton. Accounts for 33% of the total operating costs.
      2. Energy: Declined 11% YoY to Rs 913/ton. Accounts for 27% of total operating costs.
      3. Raw Materials: Rose 2% YoY to Rs 477/ton. Accounts for 14% of total operating costs.
    14. Overall variable costs reduced by 9% YoY in Q1.
    15. EBITDA margins improved 4% YoY to 31% in Q1FY21.

Investor Conference Call Highlights

  1. Cement prices remained resilient with average prices increasing about 7% over Q4FY20.
  2. Work on 1.2 million tons in brownfield expansion in Bihar and West Bengal is going on for the company.
  3. The company expects to commission a 2.3 million-ton Dalla Super clinker plant in Uttar Pradesh in the next fiscal year.
  4. Total capex for FY21 is expected to not exceed Rs 1500 Cr. The bulk of it is towards return-based capex projects which include the 66-megawatt WHRS projects spread across 7 plant locations.
  5. Among the non-core assets of the company are a unit in Dubai and a loan outstanding to a company called 3B Fibreglass in Europe. The company is still looking for buyers for these assets.
  6. The management expects a normal monsoon slowdown to take place in the industry. Utilization levels at the same time last year were at 60%.
  7. The management has stated that pricing should see corrections of 4-5% due to monsoons.
  8. The bulk of sales is occurring in out of urban areas and individual home builder demand is the major driver for demand currently.
  9. The company expects big labour come back only after Diwali when the harvest season is over.
  10. Urban real estate demand is around 30-40 million tons but this demand has suffered greatly due to the labour migration and lack of workers.
  11. The company has been able to grow 30-40% YoY in MP mainly because of the low base and dealer network addition form the acquisitions of JP and Century.
  12. The company will move ahead with a plan to permanently reduce overheads by a minimum of 10% going forward. Overheads for full-year is around Rs 5000 Cr in FY20.
  13. The contribution from green power is expected to go up to 22-23% for the current 14% due to investment in WHRS and solar.
  14. The recently concluded transaction for Ultratech which had an EV of $120 million should net the company around Rs 700 Cr. after taxes.
  15. The modernization capex requirement is around Rs 750-800 Cr.
  16. The average capacity utilization in Q1 was at 46% with only 60+ operating days in the quarter.
  17. The exceptional item of Rs 157 Cr in Q1 was in regards to an incentive of 75% from Rajasthan Govt for expansion in Aditya Cement line 3. This incentive was exhausted in 2012 but the state govt intervened in 2019 and stated that the incentive had to be 50% and the rest needed to be paid back to the govt. the company challenged this decision in the High Court and Supreme Court but lost in both cases and had to make the required pay-out.
  18. The management maintains that at each plant after the acquisition, its goal is to be able to provide the same quality products from the new plants as from its existing plants.
  19. RMC sales were at Rs 148 Cr in Q1 while White Cement sales were at Rs 250 Cr.
  20. The management expects industry volumes to have declined by 33-35% in Q1.
  21. The company is also expecting good demand in the East from institutional infra spending which happens typically before elections in the region.
  22. Despite demand coming back slowly, the management remains cautious of the near future as there are many uncertainties that may adversely affect operations.
  23. The company will start work on North Pali as it will lose the license to the mines in December 2022. Thus the company is expected to commission a facility there by October 2022.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Despite fall in volumes in Q1, the company was able to keep efficiency high and keep increasing EBITDA/ton and EBITDA margins. The company is doing well to focus on cash conservation and cost reduction after the disruption caused by COVID-19 while looking to sell off its non-core assets to reduce debt. It remains to be seen how long will it take for demand to normalize for the industry and when will demand come back to the institutional side and urban areas where demand has fallen the most. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.


 

 

Q4 FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 10584 12128 -12.73% 10146 4.32% 41376 40495 2.18%
PBT 1445* 1532 -5.68% 934 54.71% 5220** 3492 49.48%
PAT 2906 1057 174.93% 643 351.94% 5455 2412 126.16%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 10944 12501 -12.46% 10522 4.01% 42773 42072 1.67%
PBT 1462^ 1526 -4.19% 997 46.64% 5242^^ 3468 51.15%
PAT 3239 1066 203.85% 711 355.56% 5810 2400 142.08%

*Contains deferred tax credit of Rs 1708 Cr

**Contains deferred tax credit of Rs 1154 Cr

^Contains deferred tax credit of Rs 2024 Cr

^^Contains deferred tax credit of Rs 1488 Cr


Detailed Results

    1. The company had a dismal quarter with consolidated revenues declining 12% YoY and PBT declining 4% YoY.
    2. Capacity utilization in Century Cement was close to 80% despite disruption from COVID-19. The pet coke usage at the plant was at 69% and the company reduced power costs in this plant by 8% QoQ. The company also booked one-time integration costs of Rs 40 Cr in Q4.
    3. The company saw an increase in realization from Century of Rs 160/ton. The brand transition is completed for 65% production and the company expects 84% production to be transitioned to Ultratech brand by Q3FY21.
    4. In Ultratech Nathdwara, the average EBITDA generated in Fy20 was greater than Rs 1250/ton. The company also achieved a 14% cost reduction in FY20 and generated a cash profit of greater than Rs 300 Cr in FY20 from this facility.
    5. The company has incremental free reserves of Rs 2112 Cr in consolidated terms.
    6. Overall average EBITDA has been at its highest at Rs 1154/ton and normalized PAT growth without the tax credit was at 56% YoY for FY20.
    7. The total consolidated capacity for the company is at 114.8 tons per year.
    8. The company achieved its highest ever consolidated EBITDA for the year at Rs 9930 Cr in FY20. Overall operating cash flow for FY20 was in excess of Rs 5700 Cr.
    9. The consolidated debt was reduced by Rs 1765 Cr in Q4 which brings the debt reduction for FY20 to Rs 5251 Cr. India operations net debt/EBITDA as of 31st March 2020 stands at 1.55 times.
    10. The Capex target for FY21 is at Rs 1000 Cr.
    11. The company reduced Rs 404 Cr in working capital in Q4.
    12. Sales volumes for FY20 were down 4% YoY while volumes for Q4 were down 16% YoY. The fall was mainly due to the disruption caused by COVID-19 in March.
    13. In Q4, blended sales volumes grew 2% YoY at 68% while premium products grew 19% YoY.
    14. The company also added 230 new stores in FY20 bringing the total up to 2145.
    15. The company also achieved a 6% reduction in variable cost in Q4.
    16. Changes in operating costs in Q4 is as follows:
      1. Logistics: Declined 3% YoY to Rs 1149/ton. Accounts for 33% of the total operating costs.
      2. Energy: Declined 13% YoY to Rs 914/ton. Accounts for 26% of total operating costs.
      3. Raw Materials: Rose 5% YoY to Rs 497/ton. Accounts for 14% of total operating costs.
    17. Green power consumption rose to 11.6% vs 7.9% last year.
    18. The increase in RM costs is mainly due to a rise in fly ash costs.
    19. Consolidated and India EBITDA margins rose 5% YoY to 24% in FY20.
    20. ROE for FY20 was at 10% vs 7% a year ago.
    21. The board recommended a final dividend of Rs 13 per share for FY20.

Investor Conference Call Highlights

  1. The management believes that the greater part of demand currently is coming from retail and rural markets where pending work is to be completed before monsoons.
  2. The management expects slowdown from urban construction activities for at least 2-3 months mainly due to the labour exodus from these places.
  3. The management has clarified that all of the treasury surpluses of the company have been deployed in AAA liquid debt schemes and the company has zero exposure to all of the recent debt debacles like Franklin Templeton, etc.
  4. The main focus for the company in FY21 is going to be conserving cash and running a negative working capital cycle is key to this.
  5. The company has slowed down all expansion and Capex plans for FY21 and is limiting Capex for the year to Rs 1000 Cr most of which is expected to be maintenance CAPEX.
  6. The company is also targeting a fixed cost reduction target of 10% in FY21.
  7. The volume decline is mainly due to a decline in volumes from Century.
  8. Excluding one-time costs, the EBITDA per ton for Century is at Rs 575. This is expected to go up to anywhere between Rs 800-900.
  9. The management is aiming to bring net debt to EBITDA to 1 time going forward.
  10. The capacity utilization for the company was 74% and thus the management feels that the company has enough headroom to meet any additional demand that comes back once normal business activities resume.
  11. The distribution mix is at 70% road, 27% rail, and 3% ocean. The management believes that the biggest advantage of Ultratech in distribution is its dedicated fleet of transporters which account for 53% of road volumes.
  12. The management has stated that in terms of geography, West India has seen the biggest fall since it has been hit the hardest by COVID-19. In terms of capacity utilization, Central India has the lowest out of all zones.
  13. The Century products have been 100% branded to Ultratech in the West and South markets now.
  14. The main reason for the estimation of the rise in EBITDA/ton in Century is due to the rebranding and cost reduction from WHRS implementation in all plants for Century.
  15. The Q4 revenue for RMC was at Rs 555 Cr while white cement was at Rs 421 Cr. The sales volumes for white cement and putty was at 3.2 million tons.
  16. The expansion in Bara for 2 million capacity has been pushed back a quarter to Q2 due to COVID-19.
  17. The lead distance for Q4 was at 440 km.
  18. The plants in the East zone have started operating at 90% capacity.
  19. The management has clarified that receivables are at the lowest while inventory is not expected to build-up as the management aims to keep a negative working capital cycle going on.
  20. The utilization at Nathdwara was at 57% in Q4. The operating EBITDA generated from this plant is Rs 1600/ton in Q4.
  21. The management has refrained from providing any guidance on net debt reduction for FY21 due to the uncertainty involved with COVID-19 and the economic disruption.
  22. The management believes that volumes for the next 12-18 months will be driven by rural demand coming up on account of good agricultural seasons and from the government push for infrastructure development.
  23. The management has stated that the breakeven utilization for the company’s plants is between 30-40% depending on location and capacity.
  24. The only demand-led shutdown for the company is one grinding unit near New Delhi due to the capital being in a red zone.
  25. The management has stated that fly ash availability is not an issue as power plants across the country are operating still. It is the transportation of this fly ash which could prove to be an issue.
  26. Road freight for the company has remained flat for FY20.
  27. The company is operating at 35-40% of total manpower right now. This opens up avenues for manpower reduction as a major cost reduction source going forward for the company.
  28. The management has stated that it will take at least 2-3 years for the company to run down its MAT and move to the new tax regime.
  29. The pending Capex for Bara is only Rs 120 Cr which will be part of FY21 Capex. The maintenance Capex for FY21 is estimated to be around Rs 600-700 Cr.
  30. The total rural demand is estimated to be around 35% of the total industry demand.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. Despite fall in volumes in Q4, the company was able to keep efficiency high and achieve its highest ever EBITDA/ton figure. The company is doing well to focus on cash conservation and cost reduction after the disruption caused by COVID-19. It remains to be seen how long will it take for demand to normalize for the industry and when will demand come back in the principal market of West India where demand has fallen the most. Nonetheless, given the company’s leadership position in the industry, its wide distribution network across India, and its strong brand image, Ultratech Cement remains a pivotal cement sector stock for all Indian investors.


 

Q3 2020 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 10145.76 10070.32 0.75% 9452.02 7.34% 30791.53 28369.09 8.54%
PBT 933.81 627.33 48.85% 951.13 -1.82% 3774.93 2074.14 82.00%
PAT 643.15 432.7 48.64% 639.19 0.62% 2549.22 1355.78 88.03%

 

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 10521.95 10556.46 -0.33% 9768 7.72% 31829.05 29572.66 7.63%
PBT 997.43 590.59 68.89% 889.84 12.09% 3780.33 1942.16 94.65%
PAT 711.25 374.07 90.14% 578.55 22.94% 2571.07 1314.91 95.53%


Detailed Results

    1. The company had a stellar quarter with consolidated revenues remaining stable but profits growing 90% YoY. This is mainly attributed to the savings in power and fuel costs which was down 17.7% YoY and netted a savings of Rs 441 Cr for the company. Freight expenses were also down YoY with a net savings of almost Rs 209 Cr in the quarter.
    2. 9M figures were also very good with revenues rising only 7.6% YoY but profits growing 95% YoY. Similarly, this robust profit growth can be attributed to the various cost savings that the company has achieved so far in the year.
    3. The volumes growth for the cement industry is mainly led by demand in Eastern India in states like West Bengal, Bihar, Jharkhand, Odisha and Chhattisgarh.
    4. In the company’s recent acquisition Century Textiles, capacity utilization was at 79% in Q3. Quality upgradation has been completed in 3 plants so far. The company expects to reduce plant operation costs in this unit by Rs 150 per ton by Q2FY21. The company expects 84% of production to be transitioned to Ultratech brand by Q2FY21.
    5. The Nathdwara plant has been operating at 60% capacity utilization and has achieved savings of Rs 425 per ton since acquisition. It is now operating at an EBITDA/ton of > Rs 1500 and has generated cash flows of Rs 215 Cr in 9MFY20.
    6. The company has now achieved a 12.7% reduction in consumption of fossil fuels in Q3 vs 10.4% in Q2 by increasing power consumption from alternative sources like wind and solar. The current green energy capacity of the company is 200 MW and the company aims to increase it to 570 MW by the end of FY21.
    7. Alternative fuel usage for the company is at 3.5% currently.
    8. The company has been able to achieve an operating margin of 21% in Q3FY20 vs 16% in Q3FY19. It has also achieved a 31% YoY growth in normalized EBITDA/ton to Rs 2009 in Q3FY20. Overall operating EBITDA/ton was at Rs 1004 in Q3FY20 vs Rs 741 in Q3FY19.
    9. Rural sales for the company have grown 9% YoY for the company. Premium product volumes growth has been stellar at >40% YoY.
    10. The company has also reduced the net consolidated debt by Rs 1994 Cr in Q3. It has also reduced working capital by Rs 834 Cr in the quarter. Thus consolidated net debt/EBITDA has improved to 1.87 times from 2.83 times a year ago.
    11. The company has seen logistics costs fall 5% YoY while energy cost has fallen 15% YoY. However, the raw material cost has risen 2% YoY due to higher fly-ash prices and increased share of blended cement volumes.

Investor Conference Call Highlights

  1. The new infrastructure plan unveiled earlier by the government is expected to drive the cement for the next few years.
  2. The company has also settled contingent liabilities for the Sabka Vishwas Tax Amnesty Scheme and is going to pay up around Rs 133 Cr to settle and let go of the matter. This payment deadline is set for 31st March 2020.
  3. The company will spend Rs 30 Cr in integration costs for Century Cement.
  4. The company has also reduced the consumption of fossil fuels by an annualized number of 5 lac tons.
  5. The company has placed orders for grinding capacity expansion of 3.4 metric tons in the eastern markets. The company is also commissioning 3 plants in Cuttack (2 million ton), Dankuni and Pataliputra (0.7 million ton each) for composite cement. This commissioning is expected to be done by March ’21.
  6. The operating EBITDA per ton for Century is around Rs 267 excluding one-time costs. The company expects this figure to hit Rs 1000 by Q1FY21.
  7. The Century capacity is around 14.6 million tons out of which 12.2 will be used to make UltraTech cement. The rest 2.4 will be used to make the old brand which will be selling in the Chhattisgarh market only.
  8. The management has stated that unsold inventory in real estate is still high in major cities. Once the inventory level reduces, new projects will start again and demand for cement should go up.
  9. The management has also stated that projects launched under RERA should not face any delays in project execution and thus would be good for cement demand in overall.
  10. The management maintains that EBITDA per bag for premium products is slightly higher than Rs 10 and is expected to go higher as volumes for the segment rise and operating leverage kicks in.
  11. The rise in fly-ash costs is in most cases stemming from the shutdown of a power plant and thus the increase in costs is not necessarily seasonal. Thus to lock in these costs, the company is looking for long term tie-ups power plants.
  12. Total Capex commitment for the 3.4-million-ton expansion is around Rs 940 Cr.
  13. Overall volumes for the company have fallen 4% YoY mainly on the back of institutional and infrastructural volumes going down.
  14. The management expects the company to perform better than the industry.
  15. 68% of total sales are now driven by blended cement which is expected to be 71% by the end of next year.
  16. The company is maintaining its pricing position despite losing market share on wall putty for not providing discounts in small bags.
  17. The management expects that as capacity utilization improves in the near future, the company will start to see price improvements.
  18. Utilization in the south zone for the company is around 70%.
  19. The management has clarified that the company has not bid for Emami Cement at all despite media reports.
  20. The company is also looking to dispose of the non-core assets of Nathdwara and is looking into buyers from China and Europe.
  21. The management expects the capacity utilization rate for Century should rise to 85% in the next quarter.
  22. The management has stated that the company will be using the cheaper alternative among US coal and pet coke for its plant’s fuel.
  23. White cement volumes for the company were at 3.46 lac tons in Q3FY20 vs 3.7 lac tons last year. The revenues from this section was Rs 460 Cr vs Rs 500 Cr last year.
  24. The RMC revenues for Q3FY20 were Rs 500 Cr vs Rs 527 Cr last year.
  25. The company is targeting WHRS of up to 141 MW. This should cover the 11 out of 22 integrated plants of the company.
  26. The management has attributed the strong EBITDA/ton margins to the strong brand positioning and strategic location of the Nathdwara plant which has helped keep logistics costs low while addressing key markets of Rajasthan and Gujarat.
  27. The management expect the sustainable margin for the Nathdwara plant to be greater than Rs 1000 going forward.
  28. The average lead distance in Q3 and 9M this year was around 400 km.

Analyst’s View

Ultratech Cement is the biggest cement maker in India. The company has done well to acquire aging cement makers in India and integrating them and adding on to the company’s ever-growing market presence and reach in the country. It has also done well to also maintain good product quality and brand positioning which has helped the company maintain its strong market position. Moreover, with various cost savings initiatives in place like reducing fossil fuel consumption, logistics costs reduction, the company has been able to drastically improve its margins and profit-generating capability despite the slow industry conditions and declining industry volumes. Q3 was especially good for the company and further emphasized the effectiveness of the company’s cost savings by delivering exemplary profit growth of >90% YoY despite revenue growth of only 7% YoY and an overall volume decline of nearly 4% YoY. It remains to be seen how long it will take for the industry demand to rise particularly when will construction industry revives and spur the demand for cement. Nonetheless, given the company’s strong market positioning, its improving product portfolio, and its various cost optimization initiatives, Ultratech Cement remains a prime cement stock for any and every investor.

 

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