Ultratech Cement (UTCEM) Q2FY22 EBITDA was in-line with our estimate. Opex/t was up Rs 389/t QoQ and 40% of it is driven by higher other expenses. Q2FY22 power and fuel cost increased by Rs 47/t QoQ (4% QoQ) and is lower than our estimate due to low cost inventory, fuel cost efficiencies and higher consumption of green power, stated IDBI Capital Equity Research.
On pricing front, UTCEM has increased its prices by Rs 10-15/bag in Oct-21 to offset the cost inflation. And has guided for EBITDA margin of 26-28% for the coming quarter. It has commissioned 1.2mt brownfield expansion in the Eastern markets and re-iterated to commission total 4mtpa in FY22E and 15mtpa in FY23E. UTCEM’s balance sheet continues to remain lean and Net Debt/ EBITDA at 0.47x.
'From valuation perspective we are valuing at its peak to arrive at TP of Rs 7,663. But given negligible upside we have Hold rating. Price hike is the key catalyst for stock performance,' it added.
Snapshot on Q2FY22: UTCEM Q2 revenue increased by 16% YoY led by volume increase of 7% YoY. EBITDA stood at Rs 27 billion (+1% YoY/-18% QoQ) and EBITDA/t at Rs 1,325 in Q2. Opex/t was up Rs 389/t QoQ and 40% of it is driven by higher other expenses. This is led by increase in packing cost and normalisation of other fixed cost. PAT stood at Rs 13 billion, +6% YoY.
Balance sheet lean despite capex: UTCEM has commissioned 1.2mt capacity in West Bengal and Bihar unit (part of 3.2mt scheduled for FY22). In Q2FY22 company has commissioned 12MW of WHRS and 21MW of solar power. UTCEM has incurred Rs 20 billion capex in 1H and pan to incur Rs 30 billion in 2HFY22. In Q2FY22 UTCEM has retired Rs 52 billion of long term debt, and Q2FY22 Net Debt/EBITDA stood at 0.47x.
EBITDA/t going ahead: UTCEM EBITDA/t reduced to Rs 1,325 versus Rs 1,611 QoQ. Company has increased cement prices to absorb the cost inflation. And has guided uptick in EBITDA/t in 2HFY22.
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