ICICI Direct's research report on UltraTech Cement
Cement demand remained buoyant in Q3FY21 also with east region operating almost at 100% capacity utilisation. Rest all other regions barring south operated at over 80% leading to average capacity utilisation of 80% for the company in Q3. Better asset utilisations and use of low cost fuel inventory kept cost of production down 5% YoY on a per tonne basis that helped the company to achieve better margins. The full impact of higher petcoke prices would get reflected in numbers from Q1FY22 onwards. EBITDA/t for the quarter was at Rs 1,290/t (vs. I-direct estimate of Rs 1,155/t). PAT growth of 141% YoY to Rs 1,550 crore is mainly attributable to improved sales volumes along with reduced costs. On the M&A front, the 14.6 MT cement plants acquired during the previous financial year have been well integrated and operating with capacity utilisations of over 80%. On the leverage front, the company has successfully reduced its net debt/EBITDA ratio to 0.73x from 1.74x last year and 1.1x last quarter. On the recent announcement of entering into paint business by promoter Grasim Industries, the company has clarified it will continue to focus on the cement business only. However, there could be a possibility of cross selling opportunities depending upon the situation.
We maintain BUY rating with a revised TP of Rs 6300/share (i.e. 13.5x FY23E EV/EBITDA).