UltraTech Cement, on Monday, has registered a 31.5 percent growth year-on-year in standalone profit at Rs 601 crore for the quarter ended September 2016, driven by other income and operational performance despite degrowth in revenue and higher tax expenses.
Revenue declined 2.2 percent to Rs 6,195.7 crore during the quarter compared with Rs 6,338.2 crore in corresponding period of last fiscal, the Aditya Birla Group company said in its filing.
The fall in realisation hit revenue growth.
The company said sales volume during the quarter increased 1 percent to 11.18 million tonnes YoY while sales realisation fell 3 percent to Rs 4,829 per tonne.
Domestic sales volume declined 1 percent to 10.55 million tonnes, which was below estimates of 3 percent growth.
Bottomline and topline beat analysts' expectations but operating profit margin disappointed. Profit estimated at Rs 550 crore on revenue of Rs 5,545 crore while expected operating profit and margin were Rs 1,100 crore and 20 percent, respectively, according to average of estimates of analysts polled by CNBC-TV18.
Operating profit jumped 17.6 percent year-on-year to Rs 1,154.9 crore and margin expanded by 310 basis points to 18.6 percent in July-September quarter due to fall in freight & forwarding expenses (down 5.4 percent), power & fuel cost (down 17 percent) and raw material cost (down 8.5 percent).
The company has managed to beat topline expectations, but margins growth have been soft according to experts.
Prakash Diwan of prakashdiwan.in believes that stock is not likely to move much as the growth for the next quarter will come from pricing and not volume growth. It will take another quarter before growth picks-up.
Mayuresh Joshi of Angel Broking and Mangesh Bhadang of Nirmal Bang have a hold rating on the stock. Joshi says that beyond FY18, bottomline will improve for the company.
The valuation is expensive and hence, those holding it should hold on. But, it isn’t a good entry point, says Bhadang.
Jaspreet Singh Arora of Systematix Share & Stocks has a buy call on the stock with target price of Rs 4,200 plus.
UltraTech Cement said government's thrust on developing infrastructure spending, good monsoons, development of smart cities leading to growth in housing demand in Tier-I and Tier-II cities, slower pace of new capacity addition augur well for the cement industry.
Other income during the quarter grew by 29 percent to Rs 172.5 crore on yearly basis while tax expenses increased 44.2 percent to Rs 275.68 crore in same period.
At 13:40 hours IST, the scrip of UltraTech Cement was quoting at Rs 4,031.00, down Rs 7.40, or 0.18 percent on the BSE.