Ultratech Cement
BSE SENSEX
27,788
S&P CNX
8,529
20 July 2016
1QFY17 Results Update | Sector: Cement
CMP: INR3,506
TP: INR3,966 (+13%)
Buy
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Equity Shares (m)
M.Cap.(INR b)/(USD b)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
Avg Val, INR m
Free float (%)
UTCEM IN
274.4
962.2 / 14.3
3,600 / 2,581
2/18/11
921
37.7
Financials & Valuations (INR b)
2016 2017E
2018E
Y/E Mar
238.4 262.9
309.3
Net Sales
43.5 54.3
76.9
EBITDA
21.7 29.6
45.4
NP
79.3 108.0
165.3
EPS (INR)
7.9 36.2
53.1
EPS Gr. (%)
755.8 852.2 1,000.0
BV/Sh. (INR)
11.0 13.4
17.9
RoE (%)
9.3 11.5
15.2
RoCE (%)
44.2 32.5
21.2
Payout (%)
4.6
4.1
3.5
Div. Yield
Estimate change
TP change
Rating change
+7%
Operational efficiency aids profitability despite subdued realizations
Soft volume growth:
UTCEM’s 1QFY17 revenue grew 4% YoY to INR61.8b
(our estimate: INR65.6b). Its gray cement volume grew 6% YoY against
industry growth of 4%. PAT was INR7.8b, aided by higher other income due
to Ind-AS impact of INR1b.
Cost control helps offset weak realizations:
Cement prices failed to recover.
Gray cement realization declined 2.4% YoY (grew 3.5% QoQ) to INR4,083/
ton. However, UTCEM’s trend of consistent cost improvement continued. Its
unitary cost declined 6% YoY (flat QoQ), with meaningful savings on the
energy front (pet coke, better efficiency, WHRS, etc). EBITDA grew 25% YoY to
INR13.7b (our estimate: INR15.3b), translating to EBITDA/ton of INR1,053
(+INR134 QoQ;
+INR171 YoY) and(a) Net debt reduced by INR15.9b, making UTCEM a zero net
Other highlights:
margin of 22.2% (+2.2pp QoQ; +3.8pp YoY).
debt company; (b) FII investment limit increased to 30% from 24%; (c) For the
JPA deal, application for CCI clearance has been filed and the transaction is
expected to be completed in 9-10 months after getting all regulatory and
shareholders approvals – the acquisition would be EPS dilutive for 8 quarters;
(d) Secured coal linkage under auction in Maharashtra – 82,000 tons per
annum – meeting 10% of the coal requirement for Awarpur plant.
Management commentary:
The management expects 7% volume growth to
continue, given tangible signs of pick-up in infra-spending, housing sector,
smart cities and roads. UTCEM is positioned across the country to meet the rise
in demand and participate in the next phase of growth of the country.
Valuation and view:
At the critical juncture of demand recovery, UTCEM’s
strong focus on growth and cost efficiency make it a predictable play. Impact of
JPA deal would be contingent on the pace of recovery of the sector. It is a
strong bet on the cycle upturn, and in our view, the success in asset creation
should overshadow any near-term concerns for long-term investors. We factor
in 8-9% volume CAGR and 32% EBITDA CAGR over FY16-18. We value UTCEM at
INR3,966 (EV of 13.1x FY18E EBITDA and USD223/ton).
Jinesh Gandhi
(Jinesh@MotilalOswal.com); +91 22 6129 1524
Aashumi Mehta
(Aashumi.Mehta@MotilalOswal.com); +91 22 6129 1537
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Ultratech Cement
Soft volume growth; pricing fails to recover
UTCEM’s 1QFY17 domestic cement volume grew +6%YoY to 12.6mt (est.
10%YoY) against industry growth of 4% YoY.
Pricing increase was lower than expectation at 3.5% QoQ (-2.4% YoY), with
North being the strongest region. However, with spot price meaningfully higher
than 4Q-average, we expect benefit to percolate in 2HFY17.
Cement revenue stood in line at INR52.7b (+3.2% YoY), while RMC and White
cement revenues showed 3% and 7% YoY growth respectively. It translates into
total revenue of
INR61.8b, +4.8% YoY.
Exhibit 2: Grey cement realizations improved sequentially
Realizations (INR/ton)
15
Exhibit 1: Cement volume grew at 6% YoY
Dispatches (m ton)
16
7
9
5
1
-2
-1
-4 -2
0
-3
12 10
4 4 4
6
Growth (%)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 3: White cement revenue grew by 7%
21
17
13
5
8
White Cement incl Putty('000 ton)
23
15
11
5
11
7
3
3
4
7
7
9
7
Growth (%)
Source: MOSL, Company
Margin resilience amidst lukewarm pricing
UTCEM recorded +2.2pp QoQ expansion in margins at 22.2% (+3.8pp YoY), led
by significant improvement in cost structure despite subdued realizations.
UTCEM’s unitary cost was down 6% YoY on account of (a) savings in energy cost,
and (b) freight cost.
Energy cost was down 24% YoY (4% QoQ) led by (a) rise in WHRS (6% mix v/s 3%
YoY), (b)YoY better efficiency norms for fuel(1%) and power consumption(3%),
(c) better operating efficiencies (9% YoY), and (d) improved pet coke usage in
TPP 57% (v/s 55% QoQ) as well as kiln (74% vs 70% QoQ)
Consequently, EBITDA grew 25%YoY to INR 13.7b (v/s est of INR15.3b), leading
into EBITDA/ton of INR1053 (+INR134 QoQ, +INR171 YoY).
PAT stood at INR7.8b, 29% YoY, further boosted by other income(INR 1b) due to
IND AS impact.
20 July 2016
2

Ultratech Cement
Exhibit 4: Margin expansion led by better cost savings
EBITDA (INR m)
EBITDA (%)
Exhibit 5: Trend in EBITDA/ton (INR)
Source: Company, MOSL
Source: Company, MOSL
Exhibit 7: 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
1QFY17
4,687
828
700
263
1,171
684
3,686
1,052
1QFY16
4,794
842
884
253
1,251
681
3,912
882
YoY (%)
-2.2
-1.6
-20.8
3.9
-6.4
0.4
-5.8
19.3
4QFY16
QoQ (%)
4,602
1.8
802
3.2
727
-3.6
242
8.4
1,170
0.1
741
-7.7
3,683
0.1
919
14.5
Source: Company, MOSL
Concall highlights: Commentary incrementally positive
Growth: Positive demand outlook for 2HFY17
Strong growth acceleration in 2HFY16 with infrastructure projects, rural housing
and road construction to pick up post monsoon. While North and East remain
key contributors, early sign of revival was visible in AP and Telengana.
Maharashtra to show traction with Mumbai metro rail project contracts being
awarded post monsoon. Rural housing demand to pick up on the back of 7
th
Pay
commission hike and normal monsoon. Management expects demand to grow
at 7% in FY17.
Cement prices have shown some improvement sequentially with North being
the best region. The spot prices in end of June have been on the higher side and
they should remain steady and improve.
Cost tailwinds to continue
Pet coke prices have seen an upward movement but they expect the prices to
correct in the near future. While the current increase will be absorbed by overall
efficiency improvement
WHRS mix is likely to increase further with the second phase of 50MW to start
in FY17 which would increase the mix to 11% from current level of 6%.
Diesel prices have gone up inlast few months but they expect it to stabilize and
move southwards.
Capex for FY17 to be at INR15b for environment sustainability and maintenance
capex.
20 July 2016
3

Ultratech Cement
Operating metrics
Exhibit 1: Key assumptions
Capacity (MT)
Dispatches (MT)
Growth (%)
Cap. Util (%)
Grey Realization (INR/ton)
Increase (INR/ton) YoY
Blended Realn (INR/ton)
RM Cost
Power & Fuel
Other Expenditure
Staff Cost
Freight & Forwarding
Total Expenditure
Growth (%)
Blended EBITDA/ton
Grey EBITDA/ton
FY12
48.8
40.7
17.5
83.6
3,735
509
4,399
618
1,033
651
199
898
3,400
12.7
961
874
FY13
50.9
40.7
-0.2
79.9
4,103
368
4,852
698
1,032
745
232
1,014
3,721
9.4
1,079
981
FY14
54.0
41.5
2.0
76.9
4,000
-102
4,771
781
970
799
238
1,075
3,862
3.8
848
742
FY15
61.6
44.9
8.1
72.8
4,226
226
4,983
773
1,029
829
264
1,172
4,067
5.3
850
752
FY16
66.2
48.1
7.2
72.7
4,138
-88
4,891
806
858
815
275
1,201
3,999
-1.7
880
786
FY17E
66.2
52.2
8.4
78.8
4,213
75
4,976
822
764
804
279
1,231
3,948
-1.3
1,014
919
FY18E
66.2
57.3
9.8
86.5
4,583
370
5,365
838
795
804
276
1,262
3,976
0.7
1,321
1,227
Source: Company, MOSL
Exhibit 2: Regional health as shared by UTCEM management
Source: MOSL, Company
20 July 2016
4

Ultratech Cement
Financials and Valuations
Title
Chapter
Income Statement
Y/E Mar
Net Sales
Change (%)
EBITDA
EBITDA Margin (%)
Depreciation
EBIT
2011
2012
Chapter Sub Title…
132,062
87.3
25,597
19.4
7,657
17,939
181,664
37.6
40,039
22.0
9,026
31,013
2013
199,991
10.1
44,946
22.5
9,454
35,492
2,097
4,620
0
38,015
11,700
30.8
0
26,315
26,315
9.4
2013
2,742
149,606
152,348
54,085
19,059
225,493
213,822
82,599
131,224
35,054
51,087
56,723
23,505
10,172
1,427
21,619
48,595
37,903
10,692
8,128
225,493
2014
200,779
0.4
36,160
18.0
10,523
25,637
3,192
5,310
956
28,711
7,266
25.3
0
21,445
20,731
-21.2
2014
2,742
168,233
170,975
51,993
22,958
245,927
250,778
92,059
158,718
20,384
53,917
64,489
23,684
12,810
2,775
25,220
51,582
41,884
9,698
12,907
245,927
2015
226,565
12.8
39,153
17.3
11,331
27,822
5,475
6,515
0
28,863
8,715
30.2
0
20,147
20,147
-2.8
2015
2,744
185,833
188,576
74,142
27,920
290,638
318,741
109,267
209,475
20,737
52,088
69,850
27,514
12,032
2,139
28,165
61,511
48,481
13,030
8,339
290,638
2016
238,410
5.2
43,498
18.2
12,890
30,608
5,053
5,015
0
30,570
8,823
28.9
0
21,747
21,747
7.9
2016
2,744
204,617
207,360
76,607
32,274
316,241
354,478
122,157
232,321
15,000
51,081
87,956
24,261
14,149
22,351
27,195
62,280
51,013
11,267
25,677
324,079
2017E
262,941
10.3
54,312
20.7
13,565
40,747
(INR Million)
2018E
309,330
17.6
76,880
24.9
13,755
63,125
Interest
Other Income
Extraordinary items
PBT
Tax
Tax Rate (%)
Min. Int. & Assoc. Share
Reported PAT
Adjusted PAT
Change (%)
2,725
2,619
0
17,833
3,791
21.3
0
14,042
14,042
28.4
2011
2,740
103,920
106,660
26,373
17,301
150,334
179,423
65,420
114,003
6,831
37,303
41,809
19,565
6,023
1,448
14,773
49,612
43,877
5,735
-7,803
150,334
2,239
4,568
666
34,009
9,467
27.8
0
24,542
24,062
71.4
2012
2,741
125,858
128,598
41,529
17,378
187,505
190,138
73,797
116,342
18,965
37,888
56,257
20,359
7,660
1,896
26,342
41,947
33,740
8,207
14,310
187,505
5,929
7,500
0
42,318
12,696
30.0
0
29,623
29,623
36.2
2017E
2,744
231,051
233,795
71,607
34,601
340,003
359,478
135,722
223,756
25,000
29,500
126,582
27,375
14,408
55,984
28,815
64,835
54,029
10,806
61,747
340,003
5,729
7,400
0
64,796
19,439
30.0
0
45,357
45,357
53.1
2018E
2,744
271,627
274,370
71,607
38,165
384,142
364,478
149,477
215,001
40,000
29,500
166,592
32,204
15,255
87,776
31,357
66,951
55,934
11,017
99,641
384,142
Balance Sheet
Y/E Mar
Share Capital
Reserves
Net Worth
Debt
Deferred Tax
Total Capital Employed
Gross Fixed Assets
Less: Acc Depreciation
Net Fixed Assets
Capital WIP
Investments
Current Assets
Inventory
Debtors
Cash & Bank
Loans & Adv, Others
Curr Liabs & Provns
Curr. Liabilities
Provisions
Net Current Assets
Total Assets
E: MOSL Estimates
(INR Million)
20 July 2016
5

Ultratech Cement
Financials and Valuations
Ratios
Y/E Mar
Basic (INR)
EPS
Cash EPS
Book Value
DPS
Payout (incl. Div. Tax.)
Valuation(x)
P/E
Price / Book Value
EV/Sales
EV/EBITDA
EV/Ton (Cap-USD)
Dividend Yield (%)
Profitability Ratios (%)
RoE
RoCE
RoIC
Turnover Ratios (%)
Debtors (No. of Days)
Inventory (No. of Days)
Creditors (No. of Days)
Leverage Ratios (%)
Net Debt/Equity (x)
Y/E Mar
Adjusted EBITDA
Non cash opr. exp (inc)
(Inc)/Dec in Wkg. Cap.
Tax Paid
Other operating activities
CF from Op. Activity
(Inc)/Dec in FA & CWIP
Free cash flows
(Pur)/Sale of Invt
Others
CF from Inv. Activity
Inc/(Dec) in Net Worth
Inc / (Dec) in Debt
Interest Paid
Divd Paid (incl Tax) & Others
CF from Fin. Activity
Inc/(Dec) in Cash
Add: Opening Balance
Closing Balance
E: MOSL Estimates
2011
51.2
79.2
389.2
6.0
13.6
2012
87.8
120.7
469.2
8.0
10.4
2013
96.0
130.5
555.7
9.0
11.0
2014
75.6
114.0
623.5
9.0
13.5
2015
73.4
114.7
687.3
9.0
14.2
47.7
5.1
4.2
24.5
229.1
0.3
18.4
16.6
16.2
17
54
121
-0.1
2011
25,597
1,262
-925
-5,190
0
20,743
-12,169
8,574
-4,321
0
-16,489
14
-664
-2,930
-728
-4,309
-55
1,503
1,448
20.5
16.9
18.8
15
41
68
0.0
2012
40,039
1,743
158
-7,340
-22
34,578
-31,575
3,003
2,159
0
-29,416
16
83
-2,907
-1,905
-4,714
448
1,448
1,896
18.7
14.7
18.1
19
43
69
0.0
2013
44,946
1,864
-3,887
-7,165
-32
35,727
-32,676
3,051
-10,349
0
-43,025
79
12,557
-3,268
-2,539
6,829
-469
1,896
1,427
12.8
10.8
12.3
23
43
76
0.0
2014
36,160
5,310
-3,399
-3,367
956
35,660
-23,348
12,312
-2,862
0
-26,210
69
-2,092
-3,192
-2,887
-8,102
1,348
1,427
2,775
11.2
9.9
9.8
19
44
78
0.2
2015
39,153
6,515
3,900
-3,753
0
45,815
-62,440
-16,625
1,861
0
-60,579
323
22,149
-5,475
-2,869
14,128
-636
2,775
2,139
2016
79.3
126.2
755.8
9.5
13.9
44.2
4.6
4.0
21.8
211.0
0.3
11.0
9.3
9.4
22
37
78
0.1
2016
43,498
5,015
2,875
-4,470
0
46,918
-22,162
24,757
1,006
0
-21,155
66
2,465
-5,053
-3,029
-5,551
20,212
2,139
22,351
2017E
108.0
157.4
852.2
10.0
10.8
32.5
4.1
3.5
17.0
205.0
0.3
13.4
11.5
12.0
20
38
75
0.0
2017E
54,312
7,500
-2,438
-10,368
0
49,006
-22,839
26,168
21,581
0
-1,257
0
-5,000
-5,929
-3,188
-14,117
33,633
22,351
55,984
2018E
165.3
215.5
1000.0
15.0
10.5
21.2
3.5
2.8
11.4
194.6
0.4
17.9
15.2
18.6
18
38
66
-0.1
2018E
76,880
7,400
-6,102
-15,875
0
62,303
-20,000
42,303
0
0
-20,000
0
0
-5,729
-4,782
-10,511
31,793
55,984
87,776
Cash Flow Statement
(INR Million)
20 July 2016
6

Ultratech Cement
Corporate 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 cements 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.
Source: MOSL/Bloomberg
Exhibit 1: Sensex rebased
Exhibit 2: Shareholding pattern (%)
Mar-16
62.5
7.1
19.0
11.4
Promoter
DII
FII
Others
Dec-15
62.8
7.6
18.4
11.2
Mar-15
61.7
5.9
21.1
11.4
Source: Capitaline
Exhibit 3: Top holders
Holder Name
Life Insurance Corporation of India
Oppenheimer Developing Markets Fund
% Holding
2.2
1.4
Note: FII Includes depository receipts
Source: Capitaline
Exhibit 4: Top management
Name
Kumar Mangalam Birla
O P Puranmalka
Dilip Gaur
S K Chatterjee
Designation
Chairman
Managing Director
Deputy Managing Director
Company Secretary
Exhibit 5: Directors
Name
Kumar Mangalam Birla
O P Puranmalka
Dilip Gaur
G M Dave*
S B Mathur*
R C Bhargava*
D D Rathi
Source: Capitaline
Name
Adesh Gupta
Rajashree Birla
S Rajgopal*
Arun Adhikari*
Rajiv Dube
Renuka Ramnath*
Sukanya Kripalu*
*Independent
Exhibit 6: Auditors
Name
G P Kapadia & Co
BSR & Co LLP
N D Birla & Co
N I Mehta & Co
Type
Statutory
Statutory
Cost Auditor
Cost Auditor
Source: Capitaline
Exhibit 7: MOSL forecast v/s consensus
EPS
(INR)
FY17
FY18
MOSL
forecast
108.0
165.3
Consensus
forecast
116.7
152.5
Variation (%)
-7.4
8.4
Source: Bloomberg
20 July 2016
7

PRODUCT GALLERY
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Ultratech Cement
NOTES
20 July 2016
9

Disclosures
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Ultratech Cement
its
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20 July 2016
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