JPMorgan lowers target on UltraTech, says demand looks weak

Moneycontrol Bureau

Fourth quarter earnings of UltraTech Cement have been slightly disappointing. Brokerage firm JP Morgan warns that the company is currently facing headwinds as demand is likely to remain weak in the near term, essentially on a weak industry environment affecting cement prices and volumes.

JPMorgan remains underweight on the stock but has reduced its target price to Rs 1600 per share. Instead, it prefers Grasim at current valuations.

According to the firm, UltraTech Cement's Q4 FY13 sales had fallen on lower average sale prices (ASPs). However, sharply higher other operating income and lower costs led to in-line operating results, JP Morgan adds. During the January-March quarter, net sales jumped 1 percent year-on-year to Rs 5,389.2 crore. The company's profit after tax fell by 16.2 percent y-o-y to Rs 726.2 crore in fourth quarter.

Analysing the quarter gone by, JP Morgan says in a report, "The company continued to see lower power cost/mt which was driven by higher pet coke usage. Freight cost/mt increased more than 1 percent q-o-q and should see further increase in Q1FY14 with higher railway freight and diesel costs. Costs are likely to continue to inch up given steady diesel price increases."

At 12:16 hrs the stock was quoting at Rs 1,864.00, down Rs 14.75, or 0.79 percent on the BSE.

Nasrin Sultana
nasrin.sultana@network18online.com