BSE SENSEX
41,021
S&P CNX
12,101
UltraTech Cement
CMP: INR4,234
TP: INR5,050 (+19%)
Buy
Revival of Century assets to support earnings growth
Strong FCF to drive deleveraging, RoE improvement
UltraTech Cement (UTCEM) has underperformed the Sensex by 10% over the past three
months due to weak cement demand and the dismal performance of the acquired
Century Cement assets in 2QFY20. In this note, we present (a) the premise for our
expectation of an improvement in profitability of Century and (b) the case studies on the
turnaround of the other two acquisitions – JPA and Binani. With limited capex needs
going forward, strong FCF generation (~7% yield) will likely drive deleveraging and 550bps
improvement in RoE over the next two years. Against this promising backdrop, we
maintain our positive stance on UTCEM – our top pick in the sector.
27 November 2019
Update
| Sector:
Cement
Stock Info
Bloomberg
Equity Shares (m)
M.Cap.(INRb)/(USDb)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
Free float (%)
UTCEM IN
288
1219 / 17.2
4904 / 3340
-3/-14/-10
2057
38.9
Financials Snapshot (INR b)
2019 2020E 2021E
Y/E Mar
Sales
416.1 449.9 487.5
EBITDA
73.4 103.5 117.4
NP
24.8
41.4
54.7
Adj EPS (INR)
90.3 143.6 189.4
EPS Gr. (%)
1.0
59.0
31.9
BV/Sh (INR)
1,230 1,361 1,534
RoE (%)
8.2
11.7
13.8
RoCE (%)
7.1
9.3
11.2
P/E (x)
45.6
28.7
21.7
P/BV (x)
3.3
3.0
2.7
EV/EBITDA (x)
19.2
13.8
11.7
EV/Ton (USD)
168
165
158
Shareholding pattern (%)
As On
Sep-19 Jun-19 Sep-18
Promoter
61.7
61.7
61.7
DII
12.0
8.7
7.3
FII
17.9
18.7
20.9
Others
8.4
10.9
10.2
FII Includes depository receipts
Stock Performance (1-year)
Century – turnaround begins, contribution to consol. EBITDA set to
increase
Century assets generated nil EBITDA in 2QFY20, impacting UTCEM’s
profitability by 10%. EBITDA/t was down to INR1,021 (INR1,131 excluding
Century) in the quarter.
However, Century assets have started showing signs of a turnaround, which
will likely drive an improvement in earnings over the next six quarters. We
forecast Century EBITDA to increase to INR1.6b in 4QFY20 and ~INR7b in FY21,
contributing 5% and 6%, respectively, of the company’s consol. EBITDA.
Profitability improvement will primarily be driven by lower costs with better
fixed cost absorption (as utilization improves from 48% in 2QFY20), reduced
energy costs (higher petcoke usage and lower cost) and freight cost savings
(through logistics realignment).
Realization will likely improve in 4QFY20 as most of Century’s capacities
transition to the UltraTech brand by Dec’19, bettering pricing by INR12-15/bag.
Case studies: Turnaround of JPA and Binani acquisitions
UltraTech Cem.
Sensex - Rebased
5,075
4,575
4,075
3,575
3,075
When UTCEM had acquired JPA (21.2 MMTPA) and Binani (6.25 MMTPA) in
Jun’17 and Nov’18 respectively, their EBITDA was only INR100-300/t.
However, the company successfully turned these acquisitions around to
generate estimated EBITDA of ~INR1,300/t, driven by cost reduction,
rebranding and cement price hikes.
According to management, both these assets have achieved PBT break-even,
despite high acquisition cost of USD160/t for Binani and USD125/t for JPA.
Strong FCF to drive deleveraging, improve RoE
We expect strong FCF generation of >INR75b per annum (7% yield) from FY20,
which should drive deleveraging and stock price appreciation. Net debt/EBITDA
is expected to reduce to 1.1x by Mar’21 from 2.2x now.
RoE is expected to rise by >550bp to 13.8% over FY19-21, driven by strong
growth in EBITDA (26% CAGR) and lower interest costs from deleveraging.
Amit Murarka - Research analyst
(Amit.Murarka@motilaloswal.com) +91 22 7199 2309
Pradnya Ganar - Research analyst
(Pradnya.Ganar@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.
 Motilal Oswal Financial Services
UltraTech Cement
Valuations attractive; Maintain Buy
UTCEM trades at 11.7x FY21E EV/EBITDA and ~USD158/t on EV, which are at
~15% discount to the 10-year average. The stock also trades at ~35% discount to
peer Shree Cement – the highest in past 10 years (historical average: 15%).
The stock is not ascribing any value to its >20 MMTPA low-cost brownfield
expansion wherein long-term growth visibility is good. We value UTCEM at 14x
FY21E EV/EBITDA to arrive at a target price of INR5,050 (implied EV/t of
USD185/t on FY21 capacity). Maintain
Buy.
27 November 2019
2
 Motilal Oswal Financial Services
UltraTech Cement
Acquisitions providing market dominance
UTCEM has been on an acquisition spree over the past three years, growing its India
cement capacity by 71% to 113.4 MMTPA (including Bara plant scheduled to be
commissioned by Dec’19).
The company’s all-India capacity market share has expanded to 24% from 15.5%
in FY17, led by the acquisition of cement assets of Jaiprakash Associates (JPA),
Binani Industries and Century Textiles (CTIL). These acquisitions have provided
the company market dominance and pricing power, particularly in central and
west India, where it now has ~40% market share.
Moreover, the acquisitions have helped UTCEM to improve its market mix to
43% (from 29%) in favor of the stronger markets of north and central, which
have the best utilization outlook in the country. Also, the mix of weaker markets
of east and south has declined to 32% (from 41%).
Exhibit 1: Acquisitions have facilitated sharp growth in capacity and improvement in regional mix
MMTPA
East
Central
West
North
South
All India
Regional capacity split
East
Central
West
North
South
FY17
11.4
6.2
20.5
12.8
15.5
66.4
17%
9%
31%
19%
23%
Organic
0.3
3.5
1.2
JPA
11.4
4.8
5.0
21.2
0%
54%
0%
23%
24%
Century
4.4
4.2
6.0
Binani
FY20
16.1
25.3
27.7
23.8
20.5
113.4
14%
22%
24%
21%
18%
6.3
6.3
0%
0%
0%
100%
0%
5.0
6%
70%
24%
0%
0%
14.6
30%
29%
41%
0%
0%
Source: MOFSL, Company
Exhibit 2: Acquisitions-led capacity growth
Capacity (mt)
81%
68%
79%
76%
73%
74%
Capacity utilization (%)
72%
67%
70%
57%
60%
49
49
51
54
60
65
66
85
109
113
113
Source: MOFSL, Company
27 November 2019
3
 Motilal Oswal Financial Services
UltraTech Cement
Case studies: JPA and Binani turnaround
We present below the case studies of prior two acquisitions (JPA and Binani) made
by UTCEM and how these were turned around in a short span of time. UTCEM
improved the EBITDA margin at these assets by an estimated INR1,000-1,200/t,
driven by cost reduction, rebranding efforts and price hikes.
JPA (21.2 MMTPA cement capacities acquired in Jun’17)
At the time of acquisition, JPA’s assets were operating at less than 20% utilization
with 5 out of 10 clinker units operationally shut for almost a year. The asset earned
an EBITDA margin of only ~INR300/t excluding incentives. However, we estimate
that the margin has since improved to ~INR1300/t (despite higher limestone royalty
of ~INR70/t) driven by the following initiatives:
Rebranding:
JPA’s cement used to sell at INR15-20/bag (5-6%) lower than
UTCEM. However, within ~50 days, UTCEM upgraded and rebranded the cement
to its own brands, improving realization by ~INR200/t.
Price hikes:
As a major player in the region post acquisition, the company
gradually increased prices of its own brands over the next 18-20 months
(3QFY18-1QFY20) in central India (which was followed by price hikes by other
regional players as well). As a result, blended realization improved further by
~INR400/t over this period.
Production ramp-up providing operating leverage benefits:
After acquiring JPA
assets at 20% utilization in 1QFY18, UTCEM has ramped up utilization to 70-75%
now. We estimate this to have resulted in INR350-360 reduction in operating
cost per ton due to better fixed cost absorption.
Logistics realignment:
Some logistics cost benefits were also realized with
clinker supply realignment for the 1 MMTPA Sikanderabad grinding unit. We
estimate this to have driven freight cost savings of ~INR15/t. Additionally,
UTCEM benefited from cement supply chain realignment as it no longer had to
supply to central India from its Rajasthan-based cement plants (which reduced
logistics cost).
Usage of petcoke:
JPA’s assets were not using any petcoke when they were
acquired in 1QFY18. UTCEM increased petcoke usage to 65% in kiln fuel mix
since then, keeping fuel cost in check despite production ramp-up.
In line with the guidance, JPA acquisition achieved cash breakeven in four quarters
and PBT breakeven in eight quarters. The assets now are fully integrated for
branding, pricing, operations and safety standards, and operating costs are in line
with UTCEM’s own plants adjusted for the structural cost gap of ~INR100/t for
higher limestone royalty and higher hilly area freight for the Himachal plant.
Exhibit 3: Improvement in EBITDA/t for JPA (INR/t)
400
200
400
300
EBITDA/t at
acquisition
Improvement in
market pricing
Brand premium
Cost reduction
Current estimated
EBITDA/t
1300
Source: MOFSL, Company
27 November 2019
4
 Motilal Oswal Financial Services
UltraTech Cement
Binani (6.25 MMTPA Indian cement capacities acquired in Nov’18)
At the time of acquisition, Binani’s assets (now housed in a company called
UltraTech Nathdwara or UNCL) were operating at ~50% capacity utilization with an
EBITDA margin of only ~INR100/t. We estimate that the EBITDA margin has since
been improved to ~INR1,300/t driven by the following initiatives:
Rebranding:
Binani’s cement used to sell at INR25-30/bag (8-10%) lower than
UTCEM. However, within ~40 days, UTCEM upgraded and rebranded the cement
to its own brands, improving realization by ~INR250/t.
Price hikes:
As a major player in the region post acquisition and supported by
other regional players, UTCEM raised cement price in north India by INR50-
60/bag. This led to further ~INR650/t improvement in realization for these
plants.
Logistics realignment:
Supply of clinker for 1.4 MMTPA Neem Ka Thana grinding
unit was realigned to UltraTech’s Kotputlli plant (~50km away) from Binani’s
Sirohi plant (~550km away). We estimate this resulted in freight cost savings of
~INR170/t for UNCL.
Production ramp-up providing operating leverage benefits:
Capacity utilization
was improved to 60% in 1QFY20 from ~50% at the time of acquisition. We
estimate this to have resulted in INR30-40/t reduction in operating cost per ton
due to better fixed cost absorption.
Lower power & fuel costs:
The share of petcoke usage in kiln fuel mix has
improved to ~75% now from almost zero pre-acquisition. Moreover, imported
coal and petcoke prices have declined by 30-40% YoY. We estimate these to
have reduced fuel cost by ~INR70-80/t.
Within two quarters of acquisition, UTCEM has delivered INR300/t in cost savings
and achieved PBT breakeven in subsidiary UNCL. We, however, estimate that at the
consolidated level (including higher depreciation for the total acquisition value of
INR79bn booked in consolidated financials), the acquisition is yet to achieve PBT
breakeven.
Exhibit 4: Improvement in EBITDA/t for Binani (INR/t)
300
250
1300
650
100
EBITDA/t at
acquisition
Improvement in
market pricing
Brand premium
Cost reduction
Current estimated
EBITDA/t
Source: MOFSL, Company
27 November 2019
5
 Motilal Oswal Financial Services
UltraTech Cement
Century acquistion to turnaround gradually
14.6 MMTPA cement capacities acquired in Oct’19
UTCEM acquired Century Textile’s cement assets (14.6 MMTPA capacities in West,
Central and East India) for a total EV of INR86b, with equity issuance of INR56b and
debt of INR30b. UTCEM issued one equity share of face value of INR10 for every
eight equity shares of CTIL of face value of INR10, thereby issuing 14m new equity
shares to CTIL’s shareholders. As a result, UCEM’s share capital expanded to
INR2.88b (a dilution of ~5%) and its India capacity expanded by 15% to 113.4
MMTPA. While the assets came into UTCEM fold from 1
st
Oct’19, the merger was
effective from the appointed date of 20
th
May’18. As a result, UTCEM’s results have
been restated from 1QFY19 for the merger.
2QFY20 performance was weak due to low volumes, maintenance costs
Century delivered a weak performance in 2QFY20 with nil EBITDA v/s INR470/t of
EBITDA in 2QFY19 due to weak volumes (-25% YoY), reducing fixed cost absorption
and high plant maintenance costs. Utilization declined to 48% from 64% in 2QFY19
as operations were impacted by heavy rains and flooding.
EBITDA estimated to improve to INR730/t in FY21
We forecast Century assets’ EBITDA to improve to INR1.6b in 4QFY20 (from nil in
2QFY20) and INR7b by FY21, contributing 5% and 6%, respectively, of UTCEM’s
consol. EBITDA. Profitability improvement will primarily be led by lower costs –
better fixed cost absorption (as utilization improves from 48% in 2QFY20), lower
energy costs (higher petcoke usage and lower cost) and freight cost savings (through
logistics realignment). Realization is likely to start improving from 4QFY20 through
rebranding efforts and market price hikes. We estimate the EBITDA margin to
expand to INR730/t in FY21, led by:
Rebranding (INR160/t):
UTCEM plans to transition from Birla Gold (cement
brand for Century) to UltraTech in most of the states (except Chhattisgarh and
Bihar) by Dec’19 which should cover 75-80% of trade volumes. Balance volumes
should also gradually transition in FY21 once upgradation is done at the 2
MMTPA plant at Baikunth, Chhattisgarh (which is an old plant). The company
expects benefits of INR12-15/bag from rebranding. We estimate this should
result in realization benefit of ~INR160/t.
Logistics realignment (INR75/t):
While Century’s three plants are integrated
units, there should be logistics cost savings for the 2 MMTPA Sonar Bangla
grinding unit in West Bengal. Clinker for this plant can be sourced from UTCEM’s
Dalla plant which is at a distance of ~650km, saving nearly 350km of freight. It is
currently sourced from Century’s Baikunth unit which is at a distance of
~1,000km. We estimate reduction in freight cost by ~INR75/t.
Production ramp-up providing operating leverage benefits (INR295/t):
Capacity utilization should improve from 48% in 2QFY20 to ~70% in FY21. We
estimate this to result in ~INR70 reduction in operating cost per ton due to
better fixed cost absorption. Additionally, 2QFY20 saw high maintenance cost
which when annualized implies INR220-225/t of cost reduction vis-à-vis 2QFY20.
27 November 2019
6
 Motilal Oswal Financial Services
UltraTech Cement
Lower power & fuel and sourcing costs (INR80/t):
As witnessed in the case of
JPA and Binani, we expect UTCEM to improve the kiln fuel mix (in favor of
petcoke and AFR) and reduce the cost of purchase of key RM (like fly ash)
through common sourcing. Moreover, imported coal and petcoke prices have
declined by 30-40% YoY which should flow through into costs in 2HFY20. These
benefits, however, will be partly offset by an increase in royalty on limestone
extraction by ~INR70/t from 3QFY20, according to the MMRDA rules for
limestone mines transfer. We therefore estimate overall cost reduction of
~INR80/t over the next one year.
Price hikes (INR120/t):
We expect ~3% improvement in cement prices in the
next one year, which is likely to drive further ~INR120/t improvement in
realization.
Exhibit 5: EBITDA/t for Century to improve from 0 in 2QFY20
to INR732 in FY21
EBITDA/t (INR)
Exhibit 6: Trend in EBITDA and EBITDA margin
EBITDA (INR mn)
20%
15%
11%
13%
14%
7%
0%
14%
16%
EBITDA margin (%)
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 7: Improvement in EBITDA/t for Century (INR/t)
446
730
164
0
EBITDA/t for
2QFY20
120
Improvement in
market pricing
Brand premium
Cost benefit
EBITDA/t
estimated for FY21
Source: MOFSL, Company
27 November 2019
7
 Motilal Oswal Financial Services
UltraTech Cement
Lower capex and higher OCF to help in deleveraging
Monetization of non-core assets to also help reduce leverage
While inorganic assets for UTCEM came with a lower lead time, they have also
added significant debt to the balance sheet. UTCEM, which was a net cash company
until FY17, currently has net debt of INR206b with net debt/EBITDA at 2.2x. JPA
acquisition was done with an outlay of INR162b (USD125/t), while Binani was
acquired for INR79b (USD160/t for Indian assets). While Century acquisition added
only INR30b debt, it was part funded by equity dilution of 5%, implying total
acquisition cost of USD84/t. Having achieved a large capacity base, management is
now focused on ramping up these capacities (currently operating at only 70%) and
reducing leverage to 1x by FY21 which we believe is achievable.
Deleveraging led by strong FCF generation and lower capex
Operating cash flows improved 3x YoY in 1HFY20, led by a 52% YoY increase in
EBITDA and working capital improvement (reduction in inventory and receivable
days). We expect OCF generation of >INR80b annually from FY20.
At the same time, capex is also low as UTCEM has built sufficient capacity. It
plans to spend ~INR20b in FY20 and FY21, mainly toward modernization, Bara
grinding unit, Bicharpur coal block, WHRS projects and a bulk terminal.
We thus expect FCF to improve from INR20b in FY19 to INR75b in FY21. FCF
yield in 1HFY20 improved to 4.9% from 0.6% in 1HFY19 – it is expected to
increase further to 7% by FY21.
Additionally, UTCEM is looking to divest its non-core assets in China and UAE,
and also recover loans given to the Binani fiberglass business (that came to it
with the Binani acquisition), which if successful should help reduce leverage
further. It recently sold its 0.6mt of capacity in Bangladesh for a consideration of
INR2b.
We expect net debt/EBITDA to reduce from 2.95x in FY19 to 1.1x in FY21
(without building in non-core asset divestitures).
Exhibit 9: Operating cash flows to increase led by limited
capex (INR b)
OCF
58
1.76
1.06
Exhibit 8: Net debt for the Company to reduce from INR217
bn in FY19 to INR 124bn in FY21
Net Debt (INR bn)
Net Debt/EBITDA (x)
2.95
2.25
1.12
0.51
24
0.53
21
50
Capex
34
9
40
-29
-69
FCF
45 50
36
27 36
24
8 21
78
54
99
75
33
-1
38
1
0.66
33
(0.09)
-5
138
217
182
124
-61
-119
-34 -37 -24
-21 -14 -19 -16 -24 -24
Source: MOFSL, Company
Source: MOFSL, Company
27 November 2019
8
 Motilal Oswal Financial Services
UltraTech Cement
RoE to improve by 550bp over FY19-21
We estimate a CAGR of 26% in EBITDA and 48% in EPS over FY19-21. Driven by
strong operating cash flows and a reduction in interest cost, RoE and RoCE are
expected to improve by >550bp (to 13.8%) and 420bp (to 11.2%), respectively, over
FY19-21.
Exhibit 10: ROEs to improve 550bps over FY19-21
14.2
14.8
13.9
10.6
RoE (%)
RoCE (%)
11.2
9.4
9.4
9.7
8.4
9.3
7.1
17.9
20.5
19.1
13.6
11.6
12.1
11.7
9.7
8.2
11.7
13.8
Source: MOFSL, Company
27 November 2019
9
 Motilal Oswal Financial Services
UltraTech Cement
Valuations remain attractive
UTCEM trades at 11.4x FY21E EV/EBITDA and ~USD155/t on EV – at ~15%
discount to its 10-year average. The company also trades at ~35% discount to
peer SCRM – highest in the past 10 years (historical average: 15%).
We forecast a CAGR of 26% in EBITDA and 48% in EPS over FY19-21, driven by a
6% CAGR in volumes and better margins. We expect RoE to improve from 8.2%
in FY19 to 13.8% in FY21.
The company trades at 13.3x/11.7x EV on FY20/21E EBITDA. The stock is not
ascribing any value to its >20 MMTPA low-cost brownfield expansion, wherein
long-term growth visibility is good. We value UTCEM at 14x FY21E EV/EBITDA to
arrive at a target price of INR5,050 (implied EV/t of USD185 on FY21E capacity).
Maintain
Buy.
Exhibit 11: EV/EBITDA
24
18
12
6
0
UTCEM EV/EBDITA(x)
Max(x)
Min(x)
Source: MOFSL, Company
Exhibit 12: EV/ton
250
190
130
70
10
EV/ton (USD)
Max
Min
Avg
Source: MOFSL, Company
27 November 2019
10
 Motilal Oswal Financial Services
UltraTech Cement
Story in charts
Exhibit 13: Expect volume CAGR of 6% over FY19-21
Volumes (mt)
Volume growth (%)
33%
21%
7%
1%
44
44
8%
8%
2%
49
52
54
65
86
6%
93
Exhibit 14: Trend in blended EBITDA/t (INR/t)
EBITDA/t (INR)
3%
45
2%
88
Source: Company, MOFSL
Source: Company, MOFSL
Exhibit 15: EBITDA should grow at a CAGR of 26% over FY19-
21E
EBITDA (INR bn)
20
22
23
19
18
19
21
EBITDA margin (%)
20
23
18
24
Exhibit 16: EPS to grow at a CAGR of 48% over FY19-21E
Consol EPS (INR)
76%
25%
EPS growth (% YoY)
59%
11%
-18%
18%
-5%
76
90
32%
10%
-10%
99
89
1%
27
42
48
40
44
49
52
61
73
103 117
50
88
97
80
90
144 189
Source: Company, MOFSL
Source: Company, MOFSL
27 November 2019
11
 Motilal Oswal Financial Services
UltraTech Cement
Financials and Valuations
Consolidated - Income Statement
Y/E March
Total Income from Operations
Change (%)
EBITDA
Margin (%)
Depreciation
EBIT
Int. and Finance Charges
Other Income
PBT bef. EO Exp.
EO Items
PBT after EO Exp.
Total Tax
Tax Rate (%)
Minority Interest
Reported PAT
Adjusted PAT
Change (%)
Margin (%)
FY14
2,16,522
1.5
40,348
18.6
11,390
28,958
3,610
3,227
28,576
0
28,576
6,448
22.6
68
22,060
22,060
-17.6
10.2
FY15
2,43,400
12.4
44,255
18.2
12,034
32,221
5,865
3,501
29,856
0
29,856
8,835
29.6
38
20,983
20,983
-4.9
8.6
FY16
2,51,532
3.3
49,010
19.5
13,772
35,238
5,663
4,638
34,213
0
34,213
9,417
27.5
16
24,780
24,780
18.1
9.9
FY17
2,53,749
0.9
52,124
20.5
13,484
38,640
6,401
6,481
38,721
0
38,721
11,586
29.9
-14
27,149
27,149
9.6
10.7
FY18
3,09,786
22.1
61,452
19.8
18,479
42,972
12,376
5,886
36,482
-3,466
33,016
10,770
32.6
24
22,222
24,557
-9.5
7.9
FY19
4,16,090
34.3
73,437
17.6
24,468
48,970
17,779
4,678
35,869
-1,139
34,731
10,754
31.0
-37
24,013
24,799
1.0
6.0
FY20E
4,49,923
8.1
1,03,496
23.0
27,371
76,125
20,091
5,920
61,954
-62
61,893
20,526
33.2
-10
41,376
41,438
67.1
9.2
(INR M)
FY21E
4,87,480
8.3
1,17,410
24.1
28,018
89,392
16,633
6,020
78,779
0
78,779
24,125
30.6
-10
54,664
54,664
31.9
11.2
Consolidated - Balance Sheet
Y/E March
Equity Share Capital
Total Reserves
Net Worth
Minority Interest
Total Loans
Deferred Tax Liabilities
Capital Employed
Gross Block
Less: Accum. Deprn.
Net Fixed Assets
Goodwill on Consolidation
Capital WIP
Current Investment
Non Current Investment
Curr. Assets, Loans&Adv.
Inventory
Account Receivables
Cash and Bank Balance
Loans and Advances
Curr. Liability & Prov.
Account Payables
Other Current Liabilities
Provisions
Net Current Assets
Deferred Tax assets
Appl. of Funds
FY14
2,742
1,69,077
1,71,819
166
73,319
22,997
2,68,301
2,68,876
97,544
1,71,332
9,665
21,779
37,293
11,325
70,440
25,804
16,321
3,485
24,831
53,627
25,870
17,815
9,942
16,813
93
2,68,301
FY15
2,744
1,87,668
1,90,412
182
98,291
27,955
3,16,840
3,38,565
1,15,667
2,22,897
10,531
22,500
25,230
19,770
79,605
29,491
16,588
3,706
29,820
63,790
17,112
33,400
13,279
15,815
96
3,16,840
FY16
2,744
2,16,712
2,19,456
155
1,06,160
24,411
3,50,182
2,55,050
13,018
2,42,032
11,062
14,691
23,651
27,301
93,194
24,546
19,282
22,670
26,697
61,852
17,173
40,292
4,388
31,343
102
3,50,182
FY17
2,745
2,41,171
2,43,916
97
84,745
27,824
3,56,582
2,74,135
25,943
2,48,192
10,851
9,215
54,110
12,795
86,926
24,006
17,571
22,488
22,861
65,605
18,573
42,453
4,579
21,321
98
3,56,582
FY18
2,746
2,61,066
2,63,812
160
1,94,802
31,827
4,90,601
4,30,455
43,665
3,86,790
10,363
15,112
39,491
14,978
1,04,677
32,676
22,206
2,191
47,604
80,904
23,849
50,526
6,529
23,773
94
4,90,601
FY19
2,746
3,34,738
3,37,484
122
2,53,370
63,856
6,54,832
5,71,367
68,132
5,03,235
62,989
11,486
15,165
14,048
1,58,335
40,990
27,870
7,397
82,079
1,10,548
31,671
71,206
7,671
47,787
121
6,54,832
FY20E
2,886
3,70,760
3,73,646
112
2,17,433
67,520
6,58,710
5,95,353
95,503
4,99,849
62,989
11,486
6,261
22,952
1,64,654
46,026
30,136
6,413
82,079
1,09,668
34,246
67,741
7,681
54,986
186
6,58,709
(INR M)
FY21E
2,886
4,18,470
4,21,356
102
1,67,433
71,184
6,60,075
6,20,953
1,23,522
4,97,431
62,989
9,486
6,261
22,952
1,78,051
49,602
32,213
14,084
82,152
1,17,284
37,105
72,492
7,687
60,766
186
6,60,072
27 November 2019
12
 Motilal Oswal Financial Services
UltraTech Cement
Financials and Valuations
Ratios
Y/E March
Basic (INR)
EPS
Cash EPS
BV/Share
DPS
Payout (%)
Valuation (x)
P/E
Cash P/E
P/BV
EV/Sales
EV/Ton (Cap-USD)
EV/EBITDA
Dividend Yield (%)
Return Ratios (%)
RoE
RoCE
RoIC
Working Capital Ratios
Inventory (Days)
Debtor (Days)
Creditor (Days)
Leverage Ratio (x)
Current Ratio
Interest Cover Ratio
Net Debt/Equity
FY14
80.3
122.0
627.0
9.0
13.1
FY15
76.4
120.3
694.8
9.0
14.2
FY16
90.2
140.5
800.4
8.9
11.8
FY17
98.9
148.0
889.4
9.4
11.5
FY18
89.4
156.7
961.4
9.5
14.0
FY19
90.3
179.4
1,229.8
10.5
14.5
46.9
23.6
3.4
3.4
167.5
19.2
0.2
13.6
10.6
11.7
43
28
44
1.3
8.0
0.2
11.6
9.4
9.6
44
25
26
1.2
5.5
0.4
12.1
9.4
9.2
36
28
25
1.5
6.2
0.3
11.7
9.7
9.7
35
25
27
1.3
6.0
0.0
9.7
8.4
8.2
38
26
28
1.3
3.5
0.6
8.2
7.1
6.4
36
24
28
1.4
2.8
0.7
FY20E
143.6
238.4
1,361.1
11.0
8.6
29.5
17.8
3.1
3.2
164.9
13.8
0.3
11.7
9.3
8.1
37
24
28
1.5
3.8
0.5
FY21E
189.4
286.5
1,534.4
13.0
8.3
22.4
14.8
2.8
2.8
158.2
11.7
0.3
13.8
11.2
9.8
37
24
28
1.5
5.4
0.3
Consolidated - Cash Flow Statement
Y/E March
OP/(Loss) before Tax
Depreciation
Interest & Finance Charges
Direct Taxes Paid
(Inc)/Dec in WC
CF from Operations
Others
CF from Operating incl EO
(Inc)/Dec in FA
Free Cash Flow
(Pur)/Sale of Investments
Others
CF from Investments
Issue of Shares
Inc/(Dec) in Debt
Interest Paid
Dividend Paid
Others
CF from Fin. Activity
Inc/Dec of Cash
Opening Balance
Closing Balance
FY14
28,576
10,737
3,610
-2,556
-3,631
36,736
-3,227
33,508
-24,309
9,200
-1,533
899
-24,943
1
-99
-3,610
-2,888
-332
-6,928
1,637
1,848
3,485
FY15
29,856
18,123
5,492
-3,880
-263
49,329
-8,993
40,336
-69,076
-28,740
3,618
8,500
-56,957
2
25,120
-5,865
-2,972
558
16,842
221
3,485
3,706
FY16
34,213
13,772
5,042
-8,517
4,293
48,803
-3,547
45,255
-21,315
23,940
3,537
-73
-17,851
27
-5,503
0
-2,973
9
-8,440
18,964
3,706
22,669
FY17
38,721
13,484
5,822
-7,437
5,176
55,765
-5,830
49,935
-13,557
36,377
-11,209
0
-24,766
66
-22,297
0
-3,119
0
-25,350
-182
22,669
22,488
FY18
33,015
18,479
12,376
-8,429
-12,554
42,888
-16,386
26,501
-18,828
7,674
16,246
13,134
10,553
157
-42,069
-12,099
-3,340
0
-57,351
-20,297
22,488
2,191
FY19
35,384
21,398
15,486
-7,101
-9,374
55,793
-19,680
36,113
-15,562
20,551
27,691
17,415
29,544
52
-41,377
-14,837
-3,462
-827
-60,450
5,206
2,191
7,397
(INR Million)
FY20E
61,893
27,371
20,091
-16,865
-8,182
84,307
-5,920
78,387
-23,985
54,402
0
5,920
-18,065
0
-36,000
-20,091
-5,215
0
-61,306
-984
7,397
6,413
FY21E
78,779
28,018
16,633
-20,463
1,890
1,04,858
-6,020
98,838
-23,601
75,237
0
6,020
-17,581
0
-50,000
-16,633
-6,954
0
-73,586
7,671
6,413
14,084
27 November 2019
13
 Motilal Oswal Financial Services
UltraTech Cement
NOTES
27 November 2019
14
 Motilal Oswal Financial Services
UltraTech Cement
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
< - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30
days take appropriate measures to make the recommendation consistent with the investment rating legend.
Disclosures
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations,
is engaged in the business of providing Stock broking services, Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary
company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which are available on www.motilaloswal.com. MOFSL
(erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of
India Ltd. (NSE) and Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its
stock broking activities & is Depository participant with Central Depository Services Limited (CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member
of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate Agent for insurance
products.
Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/List%20of%20Associate%20companies.pdf
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell
the securities or derivatives thereof of companies mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a
market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of
interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the
analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in
some of the stocks mentioned in the research report
MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients of this report should be aware
that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment
banking or brokerage service transactions. Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and
Technical Research. Proprietary trading desk of MOFSL or its associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity
and therefore it can have an independent view with regards to Subject Company for which Research Team have expressed their views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use
would be contrary to law, regulation or which would subject MOFSL & its group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities
and Futures Commission (SFC) pursuant to the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal
Oswal Securities (SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private Limited for distribution of research report in Hong Kong. This report
is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer
or sale is not qualified or exempt from registration. The Indian Analyst(s) who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S.
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state
laws in the United States. In addition MOFSL is not a registered investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934
Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts, any brokerage and investment services provided by
MOFSL , including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as
defined by Rule 15a-6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on
by persons who are not major institutional investors. Any investment or investment activity to which this document relates is only available to major institutional investors and will be engaged in
only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as amended (the "Exchange Act") and
interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a
chaperoning agreement with a U.S. registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be
executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered
broker-dealer, MOSIPL, and therefore, may not be subject to NASD rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading
securities held by a research analyst account.
For Singapore
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services
license and an exempt financial adviser in Singapore.As per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First
Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in Singapore should contact MOCMSPL in respect of any matter arising
from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be
such an institutional investor, such Singapore Person must immediately discontinue any use of this Report and inform MOCMSPL.
Specific Disclosures
1 MOSL, Research Analyst and/or his relatives does not have financial interest in the subject company, as they do not have equity holdings in the subject company.
2 MOSL, Research Analyst and/or his relatives do not have actual/beneficial ownership of 1% or more securities in the subject company
3 MOSL, Research Analyst and/or his relatives have not received compensation/other benefits from the subject company in the past 12 months
4 MOSL, Research Analyst and/or his relatives do not have material conflict of interest in the subject company at the time of publication of research report
5 Research Analyst has not served as director/officer/employee in the subject company
6 MOSL has not acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
7 MOSL has not received compensation for investment banking/ merchant banking/brokerage services from the subject company in the past 12 months
8 MOSL has not received compensation for other than investment banking/merchant banking/brokerage services from the subject company in the past 12 months
9 MOSL has not received any compensation or other benefits from third party in connection with the research report
10 MOSL has not engaged in market making activity for the subject company
********************************************************************************************************************************
The associates of MOFSL may have:
-
financial interest in the subject company
-
actual/beneficial ownership of 1% or more securities in the subject company
-
received compensation/other benefits from the subject company in the past 12 months
27 November 2019
15
 Motilal Oswal Financial Services
UltraTech Cement
other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific
recommendations made by the analyst(s), as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there
might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
-
acted as a manager or co-manager of public offering of securities of the subject company in past 12 months
-
be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies)
discussed herein or act as an advisor or lender/borrower to such company(ies)
-
received compensation from the subject company in the past 12 months for investment banking / merchant banking / brokerage services or from other than said services.
The associates of MOFSL has not received any compensation or other benefits from third party in connection with the research report
Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider
demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not
considered in above disclosures.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research
analyst(s) was, is, or will be directly or indirectly related to the specific recommendations and views expressed by research analyst(s) in this report.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be
altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is
based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not recommendatory in nature. The information is obtained from
publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made
as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not
constitute an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments for the clients. Though disseminated to all the customers
simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or
in whole, to any other person or to the media or reproduced in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be
used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments. Nothing in this report constitutes investment, legal,
accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this
report may not be suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This
may not be taken in substitution for the exercise of independent judgment by any recipient. Each recipient of this document should make such investigations as it deems necessary to arrive at
an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult its own advisors to
determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures,
options, another derivative products as well as non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied,
is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The Disclosures of Interest Statement incorporated in this document is
provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and
the employees may from time to time, effect or have effected an own account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform
or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in this report. Each of these entities functions as a
separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is
already available in publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the
views expressed therein. This document is being supplied to you solely for your information and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or
published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any
locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or
licensing requirement within such jurisdiction. The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose
possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm, not its directors, employees, agents or representatives shall be
liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not
to hold MOFSL or any of its affiliates or employees responsible for any such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses,
costs, damages,
expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.CIN no.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai-
400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI:
ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate Agent: CA0579;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration
No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth Management Ltd. (MOWML): PMS (Registration No.:
INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond,
NCDs,Insurance Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered
through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk
Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities market is subject to market risk,
read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law
Tribunal, Mumbai Bench.
-
27 November 2019
16