Accumulate UltraTech Cement; target of Rs 4496 KRChoksey

KRChoksey's research report on UltraTech Cement

UltraTech Cement’s revenue declined by 33.1% YoY in Q1FY21 to INR 7,634 Cr (down 29.0% QoQ). EBITDA for the quarter declined 29.7% YoY (down 15.1% QoQ) to INR 2,075 Cr. EBITDA margin expanded by 131bps YoY (+444bps QoQ) to 27.2% in Q1FY21 from 25.9% in corresponding quarter last year. Reported Net Profit de-grew by 37.8% YoY (down 75.4% QoQ) to INR 797 Cr. Exceptional item represents an amount of INR 157.37 Cr, booked as a one-time expense during the three months ended 30/06/2020, upon receiving an order dated 17/07/2020, issued by the Hon’ble Supreme Court against the Company’s claim of capital investment subsidy, under Rajasthan Investment Promotion Scheme -2003.

Outlook

With prudent cost management shown by the company in distressing times, along with deleveraging, we now value UltraTech Cement at 15x EV/EBITDA (previously 14x) on FY22E EBITDA (earlier FY21E) and arrive at a revised Target Price of INR 4,496/share (previously INR 3,966); an upside potential of 7.5% over CMP. Accordingly, we reiterate our ‘ACCUMULATE’ rating on the shares of Ultratech Cement

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