Ultratech Cement's Q4 net down 28% despite rise in sales and revenue

Ultratech Cement has reported net (after-tax) profit of Rs560 crore for fiscal fourth quarter ended 31 March 2017, a 28-per cent fall year-on-year, despite higher revenue and sales volume, due mainly to higher interest and lower other income.

Revenue for the January-March 2017 quarter grew 3 per cent y-o-y, based on 3 per cent growth in sales volume, while realisation remained flat, Ultratech stated in a release.

Earnings before interest, tax, depreciation and amortisation (EBITDA) at Rs860 per tonne (5 higher than estimated) declined by 10 per cent year-on-year, primarily due to higher costs and subdued demand growth.

As the impact of demonetisation recedes, the company expects to perform on the back of infra and rural housing-led demand growth and better price stability.

''We increase our target price from Rs4,200 to Rs4,600 as we value the company at 18x FY19e EV / EBITDA (earlier 17x 1HFY19e EV/EBITDA), implying EV / ton of $245. We revise the rating from Buy to Accumulate given the recent increase in stock price.

Ultratech's fourth quarter sales grew 3 per cent to Rs6,500 crore, higher than estimated, led by a volume pick-up in March - a 3b per cent increase to 14.07 million tonnes.

Exports rose to 0.33 million tonnes against 0.12mn tonnes in the year-ago quarter, while domestic grey and white volumes rose by a meager 1.1 per cent and 0.3 per cent, respectively.

Capacity utilisation was more than 80 per cent against industry level of 70 per cent, implying market share gains.

Blended realisation at Rs4,640 grew 0.4 per cent year-on-year, but was down 1.7 per cent quarter over quarter.

Ultratech Cement believes the quarter's performance to be a temporary blip, on subdued housing demand, volatile pricing and rising costs.

For the full fiscal FY17, volumes have grown 1.5 per cent year-on-year, while industry volumes remained flat. The company maintains a positive outlook on demand growth on the back of affordable housing, interest subvention scheme, infra growth coming from AP, Telangana, UP development, better rural housing demand on increasing cash flows.      

Ultratech registered a 10-per cent decline in EBIDTA for the fiscal at Rs860 a ton due to higher other expenses though EBITDA per tonne output was higher than estimated due to lower-than-expected costs.

The company's total costs / ton increased by 4 per cent  a 50 per cent year-on-year increase in average prices of pet coke / imported coal. Ultratech claims to have achieved this by using industrial waste (instead of coal), selling higher proportion of blended cement, achieving higher power efficiency through reduced power consumption with improved CPP efficiency and higher WHR share.
 
Other expenses rose 8 per cent due to an increase in variable costs and packing material.

Freight expenses, on the other hand, marginally declined due to an increase in usage of sea routes, lower road freight versus diesel price increase (5 per cent v/s 27 per cent) and realignment of market mix to enable cement supply from new units.

Ultratech said work on setting up 3.5 million tonne ICP at Dhar, MP is on track. Commercial production is expected in 4QFY19.

On JAL plants acquisition, Unitech said, it has received the sanction from NCLT. The scheme will be made effective post transfer of mines from JAL on receipt of the approval from MMDR. The acquisition will increase Unitech's capacity to 95.4 million tonnes, including overseas capacity.