UltraTech Cement (UTCEM) Q1FY22 EBITDA was in-line with our estimate. Opex/t was largely flat QoQ but EBITDA/t was higher by 13% QoQ to Rs 1,571 led by price hikes. Q1FY22 UTCEM capacity utilization stood at 73% with June-21-month utilization at 74%. UTCEM re-iterated its plan to expand capacity by 19mt to reach 136mt by FY23E. UTCEM’s balance sheet continues to remain lean and Net Debt/ EBITDA at 0.44x vs 0.55x QoQ.
Commenting on the result review, IDBI Capital said, "Post the result, we have maintained our estimate and revised our TP to Rs 7,362 (valuing the company at 15x FY23E EV/EBITDA versus 13x earlier). From valuation perspective we are valuing at its peak to arrive at TP. But given nil upside we have HOLD rating. Positive in UTCEM business is its leadership position in Indian cement market, balance sheet deleveraging and capacity addition. And near-term risk remains from weakness in realization and cost inflation which could impact EBITDA/t."
Key Highlights and Investment Rationale
Snapshot on Q1FY22: UTCEM Q1 revenue increased by 55% YoY led by volume increase of 44% YoY. EBITDA increased by 59% YoY and EBITDA/t stood at Rs 1,571 in Q1. Q1FY22 UTCEM capacity utilization stood at 73% vs 46% YoY. Region wise utilization for East/ North/ South/ North was at +95%/ +75%/ +50% and Central/ West at +70%.
Capacity addition plans intact: Company's expansion program of ~19mtpa is on track and is expected to get completed by FY23. On completion UTCEM’s total capacity will reach at 136.25mt. In FY22, UTCEM is planning to commission ~3mt capacity and remaining capacity will be commissioning in FY23E. Company repaid Rs 7.3 billion debt in Q1FY22 with Net Debt/EBITDA at 0.44x vs 0.55x QoQ. Company re-iterated its aim to be net cash company with in next two years despite doing capex on the capacity addition.
EBITDA/t going ahead: UTCEM has delivered EBITDA/t of Rs 1,571 with highest quarterly EBITDA margin of 28%. But in Q2FY22E there has been weakness in realization due to monsoon and slow movement in demand. Cost inflation is also there, with pet coke July month delivery at USD160/t vs Q1FY22 consumption at USD123/t. We have modeled EBITDA/t of Rs1,428/Rs1,438 for FY22E/23E.
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