21 October 2013
2QFY14 Results Update | Sector:
Cement
Ultratech Cement
BSE SENSEX
20,883
Bloomberg
Equity Shares (m)
M.Cap. INR b/USD b
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
S&P CNX
6,189
UTCEM IN
274.2
538.1/8.6
2,066/1,405
10/-8/-15
CMP: INR1,964
TP: INR1,925
Neutral
Profitability below estimates on lower realizations, higher cost
Ultratech Cement's (UTCEM) 2QFY14 performance is below estimates, with
blended EBITDA/ton of INR704 (-INR360 YoY, -INR320 QoQ) v/s est. INR889/ton,
impacted by lower realizations and higher cost.
Grey cement volumes stood at 9.23mt (-0.6% YoY, -9% QoQ v/s est. 9.06mt). Grey
cement realizations declined ~3.6% QoQ (-6% YoY) to INR3,973/ton.
EBITDA de-grew 34% YoY (37% QoQ) to INR6.6b (v/s est. INR8.2b), translating
into blended EBITDA/ton of INR704 (-INR360 YoY, -INR320 QoQ).
Costs inflation was higher-than-expected on account of RM/energy and other
expenses. Further lower other income, higher interest cost and higher tax further
impacted PAT at ~INR2.6b, a de-growth of 52% YoY (61% QoQ).
We downgrade FY14E/FY15E EPS estimates by 10%/7% to INR86/INR103 to factor
weaker volumes and pricing. We also factor for realization improvement of
~INR7.5/INR10/INR10 per bag in 3Q/4QFY14E/FY15E and volume growth
assumption of 2%/9.6% in FY14E/FY15E.
Based on our preliminary estimates for consolidation of Jaypee’s Gujarat plant,
the stock trades at 19.1x FY15E EPS, 10.4x EV/EBITDA and USD132/ton. Current
valuations largely factor for potential recovery in FY15, benefit of which would be
diluted due to initial impact of Jaypee’s Gujarat plant acquisition by 1HFY15.
Downgrade to
Neutral
with a target price of INR1,925 (10x FY15E EV/EBITDA).
Financials & Valuation (INR B)
Y/E MAR
2013 2014E 2015E
Net Sales
200.2 207.6 239.1
EBITDA
Adj PAT
Adj.EPS.INR
Gr. (%)
BV/Sh.(INR)
RoE (%)
RoCE (%)
P/E (x)
P/BV (X)
45.2
26.6
96.8
10.4
555.7
18.9
21.4
20.3
3.5
42.1
23.7
86.4
-10.8
630.4
14.6
16.8
22.7
3.1
51.2
28.2
102.9
19.1
719.3
15.2
18.5
19.1
2.7
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 3982 5416
Sandipan Pal
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
Investors are advised to refer through disclosures made at the end of the Research Report.

Ultratech Cement
Weak volume, realization impacts revenues
Net sales de-grew 4%YoY (-9% QoQ) to INR45b (v/s est INR44.9b).
Grey Cement volumes stood at 9.23mt (-0.6% YoY, -9% QoQ v/s est 9.06MT),
while white cement (incl Putty) volume grew by 15% YoY (+10% QoQ).
Blended realization (incl RMC & white cement) stood at INR4,803/ton (-1% QoQ
v/s est INR4,879/ton).
Grey cement realizations declined ~3.6% QoQ (-6% YoY, -INR147 QoQ) to
INR3,973/ton (v/s est INR4,050/ton).
Trend in White cement volume
White Cement incl Putty('000 ton)
29
18
9.2
Trend in grey cement volume and realizations
Realizations (INR/ton)
11.5
10.8
10.3
9.2
9.8
9.9
10.1
9.2
10.3
9.3
Dispatches (m ton)
11.1
9.9 10.1
Growth (%)
21
9
10 11
-1
17
13
5
8
11
15
5
Source: Company, MOSL
Source: Company, MOSL
Lower realizations, higher cost results in very weak profitability
EBITDA de-grew 34%YoY (37% QoQ) to INR6.6b (v/s est INR8.2b), translating
into EBITDA margins of 14.7% (-650bp QoQ & -670bp YoY; v/s est 18.2%).
Blended EBITDA/ton stood at INR704 (-INR360 YoY, -INR320 QoQ) v/s est
INR889/ton.
Costs inflation was higher than expected, on account of RM/energy and other
expenses. While RM cost got impacted due to higher inward freight, energy cost
was impacted due to lower linkage coal and other expenses were higher largely
due to maintenance related cost.
Further lower other income (due to MTM losses on treasury), higher interest
cost (due to commissioning of new capacities) and higher tax further impacted
to PAT to ~INR2.6b (v/s est ~INR3.9b), a de-growth of 52% YoY (61% QoQ).
Trend in profitability
EBITDA (INR m)
25.1
12.7
19.1
EBITDA (%)
23.7 25.4
21.4 21.1 22.3 21.2
27.3 20.9
14.7
EBITDA (INR/ton)
23.0 14.9
Source: Company, MOSL
Source: Company, MOSL
21 October 2013
2

Ultratech Cement
Trend in key operating parameters (incl RMC & white cement business)
INR/Ton
Realization
RM Cost
Power & Fuel
Staff Cost
Freight & Forwarding
Other Expenditure
Total Expenditure
EBITDA
2QFY14
4,803
807
1,021
303
1,061
907
4,099
704
2QFY13
4,988
692
1,140
254
989
846
3,921
1,067
YoY (%)
-3.7
16.7
-10.5
19.4
7.3
7.2
4.5
-34.0
1QFY14
4,846
763
967
245
1,077
768
3,821
1,026
QoQ (%)
-0.9
5.8
5.5
23.8
-1.5
18.1
7.3
-31.4
Source: Company, MOSL
Volume outlook further moderated
Outlook revised:
“The outlook continuous to remain challenging. Demand
growth in FY14 is likely to be around 5%, though over the long run it is likely to
be over 8%. The key value drivers will be housing demand and infrastructure
spending”. It had earlier revised volume growth expectation to 6% in 1QFY14
from 8% earlier.
It is investing ~INR137b investing in ~12.7mt capacities, CPP, marketing and
logistic infrastructure, modernization/ up-gradation and in RMC business.
The clinkerization plant of 3.3MT in Karnataka has been commissioned, followed
up with ~1.6mt grinding unit at Odisha. Further, planned capacity of 2.9mt at
Rajasthan plant (incl 2 split grinding units) with capex of INR21b would
commission by Mar-15, would take total capacity in India to 68mt.
Acquisition of Jaypee’s Gujarat plant offers meaningful synergies
UTCEM has approved acquisition of Jaypee’s 4.8mt of Gujarat asset at EV of
INR38b (USD124/ton).
Hence, UTCEM’s total capacity would increase to ~70mt (post expansion by
FY16), of which Gujarat will be ~17%.
Transaction structure includes (1) UTCEM assuming INR36.5b of JCCL’s debt and
(2) INR1.47b of UTCEM’s equity (0.32% dilution). The deal is expected to take 7-
9 months to conclude.
The transaction offers UTCEM with good quality asset, along with the scope of
doubling capacity and location advantage, being a coast-based plant.
We expect value accretion from next two to three years led by of several
synergistic benefits and market consolidation, including:
Premium branding to drive improvement in realizations (~INR15/bag) and
profitability
Savings on freight cost led by cement/clinker swap and market realignment
Market consolidation, with over 30% market share (~49% capacity share) for
UTCEM to aid pricing power
Tax savings on carry forward loss of INR3.5b (as per the management).
FY15E/16E PBT may be dented by 5.7%/3.2% due to an increase in net debt,
while EPS may witness an upgrade of 2-3%, due to tax savings on carry forward
losses.
21 October 2013
3

Ultratech Cement
Impact of acquisition of JPA's Gujarat plant on UTCEM (Provisional)
INR m
Capacity
Utilization (%)
Volumes
Blending (x)
Revenues
Realization (INR/ton)
EBITDA
EBITDA (INR/ton)
EBITDA (%)
Depreciation
Interest
PBT
PAT
UltraTech's PBT post-deal
Change in PBT (%)
FY14E
4.8
70
3.3
12,590
3,766
706
211
5.6
1,959
1,653
-2,907
-2,907
FY15E
4.8
77
3.7
16,056
4,366
2,799
761
17.4
1,959
3,650
-2,811
-2,811
37,211
-7.0
FY16E Remarks
4.8
83
4.0
18,333
4,616
3,768
949
20.6
1,959
3,650
-1,842
-1,842
45,505
-3.9
Assuming a) INR15/bag improvement in prices and
b) INR15/bag brand premium for UltraTech over
Jaypee
Factoring in for synergies of ~INR500m
Factoring in for tax benefit on C/F losses of
~INR2.9b each in FY15/FY16
EPS post-deal
106
127
Change in EPS (%)
2.9
4.5
Revised TP (@ 10x EV/EBITDA)
1,889
2,035
Chg in TP (%)
-2.1
Implied EV/Ton at TP
122
132
Based on ~67mt capacity, adj for CWIP
FY13 (9M) estimated based on combined operations of Gujarat & AP plant of JCCL
Source: Company, MOSL
Downgrading estimates and recommendation to Neutral
We are downgrading our FY14/FY15 EPS estimates by 10%/7% to INR86/INR103
to factor in weaker volumes and pricing.
We are factoring in for (a) realization improvement of ~INR7.5/INR10/INR10 per
bag in 3Q/4QFY14/FY15 (v/s earlier estimates of -INR5/bag), (b) volume growth
assumption of 2%/9.6 in FY14/FY15, and (c) higher interest cost and tax.
Based on our preliminary estimates for consolidation of Jaypee's Gujarat plant,
the stock trades at 19.1x FY15 EPS, 10.4x EV/EBITDA and USD132/ton.
Current valuations largely factor in for potential recovery in FY15, benefit of
which would be diluted due to initial impact of Jaypee's Gujarat plant acquisition
by 1HFY15. Downgrade to
Neutral
with target price of INR1,925 (10x FY15E
EV/EBITDA).
UltraTech: Revised forecast
(INR b)
Net Sales
EBITDA
Net Profit
EPS (INR)
Key Assumptions
Volume Growth (%)
Real Change (INR/ton)
EBITDA (INR/ton)
Rev
207.6
42.1
23.7
86.4
2.1
44
1,000
FY14E
Old
208.4
45.6
26.3
96.1
1.1
113
1,093
Chg (%)
-0.4
-7.6
-10.0
-10.0
Rev
239.1
51.2
28.2
102.9
9.6
200
1,109
FY15E
Old
235.5
54.3
30.4
110.9
7.2
200
1,214
Source: MOSL
Chg (%)
1.5
-5.7
-7.2
-7.2
21 October 2013
4

Ultratech Cement
Trend in EV/EBITDA (x)
EV/EBDITA(x)
16
12
8
4
0
7.2
1.7
12.2
9.3
Peak(x)
Avg(x)
Min(x)
Source: Bloomberg, MOSL
Trend in EV/Ton (USD)
EV/ton (USD)
210
160
110
60
10
108
28
Max
173
137
Avg
Min
Source: Bloomberg, MOSL
21 October 2013
5

Ultratech Cement
Ultratech Cement: an investment profile
Company description
UltraTech Cement, the erstwhile cement division of L&T
Ltd, is a subsidiary of Grasim, a part of the Aditya Birla
Group. Post merger of Grasim’s cement business, it is
the largest cement company in India with a total
cement capacity of 61.5mt (by 1QFY16) with a pan-India
presence. It is the largest exporters of cement and
clinker from India. Post merger, it would be the largest
cement company in India and 10th largest in the world.
Recent developments
UTCEM has approved acquisition of Jaypee’s 4.8mt
of Gujarat asset at EV of INR38b (USD124/ton).
Valuation and view
Key investment arguments
The largest cement company with pan-India
presence.
Potential to increase throughput without incurring
major capex by increasing utilization and blending,
along with locational advantage, gives it the
flexibility to either export or sell in the domestic
market.
Significant potential to increase throughput by
increasing blending.
Allied businesses of white cement and RMC lend
stability to overall performance.
High
operating
leverage,
especially
post
commissioning of new capacities in 1QFY14, could
result in volatile earnings.
Based on our preliminary estimates for
consolidation of Jaypee's Gujarat plant, the stock
trades at 19.1x FY15E EPS, 10.4x EV/EBITDA and
USD132/ton.
Downgrade to
Neutral
with target price of INR1,925
(10x FY15E EV/EBITDA).
Sector view
Post weak pricing environment during monsoon,
cement prices and demand are expected to pick-up
post monsoon.
Structural increase in cost base (both capex and
opex) would necessitate higher cement prices.
Revival in cement demand would be key catalyst for
the stock performance.
Key investments risks
Comparative valuations
P/E (x)
P/BV (x)
EV/Ton ($)
EV/EBITDA (x)
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
FY14E
FY15E
UTCEM
22.7
19.1
3.1
2.7
138
132
12.4
10.2
ACC
20.5
17.4
2.5
2.4
90
84
10.7
8.5
ACEM
24.6
21.3
3.2
3.0
149
143
14.4
12.4
EPS: MOSL forecast v/s consensus (INR)
MOSL
Forecast
FY14
FY15
86.4
102.9
Consensus
Forecast
97.5
113.9
Variation
(%)
-11.4
-9.6
Target price and recommendation
Current
Price (INR)
1,964
Target
Price (INR)
1,925
Upside
(%)
-2.0
Reco.
Neutral
Shareholding pattern (%)
Sep-13
Promoter
Domestic Inst
Foreign
Others
62.0
4.8
23.4
9.9
Jun-13
62.0
4.6
23.5
10.0
Sep-12
62.8
4.3
23.0
9.9
Stock performance (1-year)
21 October 2013
6

Ultratech Cement
Financials and valuation
21 October 2013
7

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ULTRATECH CEMENT LTD
No
No
No
No
Disclosures
Ultratech Cement
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