CMP 2170.50

Target Price 2344.00

ISIN: INE481G01011

APRIL 24th

2014

ULTRATECH CEMENT LIMITED

Result Update: Q4 FY14

BUY

Index Details

Stock Data

Sector Cement

BSE Code 532538

Face Value 10.00

52wk. High / Low (Rs.) 2274.95/1404.95

Volume (2wk. Avg.) 6451

Market Cap (Rs. in mn.) 595216.22

Annual Estimated Results (A*: Actual / E*: Estimated)

YEARS FY14A FY15E FY16E

Net Sales 202798.00 219021.84 232163.15

EBITDA 41469.40 45507.11 50954.40

Net Profit 21444.70 23684.30 26767.86

EPS 78.20 86.37 97.61

P/E 27.76 25.13 22.24

Shareholding Pattern (%)

1 Year Comparative Graph

ULTRATECH CEMENTS LTD S&P BSE SENSEX

SYNOPSIS

UltraTech Cement Ltd an Aditya Birla Group cement major, is among the top 10 producers of cement in the world and the largest in India.

For the quarter, Total Income from Operations ramps up by 8.89% to Rs. 59598.8 mn as compared to Rs. 54734.1 mn in Q4 FY13.

During Q4 FY14, PAT is Rs. 8380.0 mn compared to Rs. 7262.0 mn in Q4 FY13, registered a growth of 15.40%.

Profit before interest, depreciation and tax is Rs. 13287.8 mn as against Rs. 13826.0 mn in Q4 FY13.

UltraTech Cement has recommended a dividend of Rs. 9/- per equity share of Rs. 10/- each for the year ended March 31, 2014.

For the quarter, the combined cement and clinker sales of grey cement is 12.18 MMT (11.13 MMT) up by 9%, while for white cement and wall care putty it is 3.29 LMT (2.92 LMT).

The Company has earmarked around Rs. 1,00,000 mn to be incurred in setting up the grinding units, clinkerisation plants, cement terminals and other capex, and these are likely to be commissioned in a phased manner by 2015.

The acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation Ltd is now subject to the final approval of the Securities and Exchange Board of India.

During the year the Company has commissioned Clinkerisation plant of 3.30 mtpa, 25 MW TPP and 1.45 mtpa cement plant at Rajashree Cement in Karnataka.

Net Sales of the company is expected to grow at a CAGR of 5% over 2013 to 2016E respectively.

PEER GROUPS CMP MARKET CAP EPS P/E (X) P/BV(X) DIVIDEND

Company Name (Rs.) Rs. in mn. (Rs.) Ratio Ratio (%)

Ultratech Cements Ltd 2170.50 595216.22 78.20 27.76 3.48 90.00

ACC Ltd 1347.75 253309.60 58.30 23.12 3.24 300.00

Ambuja Cements Ltd 218.75 338278.80 8.37 26.14 3.35 180.00

Shree Cement Ltd 5895.00 205365.40 242.88 24.27 5.34 200.00

Recommendation & Analysis - ‘BUY’

For the quarter ended Q4 FY14, Total Income from Operations (Net) ramps up by 8.89% to Rs. 59598.80 mn as

compared to Rs. 54734.10 mn in Q4 FY13. Profit before interest, depreciation and tax is Rs. 13287.80 mn as

against Rs. 13826.00 mn. Profit after Tax is Rs. 8380.00 mn (including tax provision reversal related to earlier

years - Rs. 955.6 mn) compared to Rs. 7262.00 mn in Q4 FY13, registered a growth of 15.40%. The combined

cement and clinker sales of grey cement is 12.18 MMT (11.13 MMT) up by 9%, while for white cement and wall

care putty it is 3.29 LMT (2.92 LMT). The Company has earmarked around Rs. 1,00,000 mn to be incurred in

setting up the grinding units, clinkerisation plants, cement terminals and other capex in the current round of

expansions. These are likely to be commissioned in a phased manner by 2015.

The year witnessed continuing pressure on input and logistics costs, given the increase in railway freight and a

continuous hike in diesel prices. Although there was some relief on account of softening in prices of imported

coal, the impact was negated by the depreciation in rupee. Optimization of fuel mix and other initiatives helped in

maintaining costs almost at the previous year levels. The long term cement demand is likely to grow over 8% in

line with GDP growth. The value drivers for growth will continue to be housing demand and infrastructure

development. The Government is fully cognizant of issues relating to this sector. It has allocated US $ 1 trillion

towards bridging the gap. This augurs well for the growth of the Company. Hence, we recommend ‘BUY’ for

‘UltraTech Cement Ltd’ with a target price of Rs. 2344.00 for medium to long term investment.

QUARTERLY HIGHLIGHTS (STANDALONE)

Results updates- Q4 FY14,

UltraTech Cement Ltd an Aditya Birla Group cement

major, is among the top 10 producers of cement in

the world and the largest in India, reported its

financial results for the quarter ended 31st Mar,

2014.

Months Mar-14 Mar-13 % Change

Net Sales 59598.80 54734.10 8.89

PAT 8380.00 7262.00 15.40

EPS 30.56 26.49 15.37

EBITDA 13287.80 13826.00 (3.89)

The company’s net profit jumps to Rs. 8380.00 million against Rs. 7262.00 million in the corresponding quarter

ending of previous year, an increase of 15.40%. Revenue for the quarter rose by 8.89% to Rs. 59598.80 million

from Rs. 54734.10 million, when compared with the prior year period. Reported earnings per share of the

company stood at Rs. 30.56 a share during the quarter, registering 15.37% increased over previous year period.

Profit before interest, depreciation and tax is Rs. 13287.80 millions as against Rs. 13826.00 millions in the

corresponding period of the previous year.

Break up of Expenditure

Break up of

Expenditure

(Rs in million)

Q4 FY14 Q4 FY13 CHNG

%

Cost of Material

Consumed 8229.60 7613.20 8%

Employee Benefit

Expenses 2352.10 2609.10 -10%

Depreciation &

Amortization Expense 2784.50 2459.90 13%

Other Expenditure 9279.40 8293.90 12%

Purchase of Stock in

Trade 915.00 625.00 46%

Power & Fuel 11868.60 10559.40 12%

Freight & Forwarding

Charges 13654.70 11955.20 14%

Latest Updates

• UltraTech Cement Ltd has recommended a dividend of Rs. 9/- per equity share of Rs. 10/- each for the year

ended March 31, 2014.

• The acquisition of the Gujarat Cement Unit of Jaypee Cement Corporation Limited ("JCCL"), comprising of an

integrated cement unit at Sewagram and Grinding Unit at Wanakbori at an enterprise value of Rs. 3,800

crores besides the actual net working capital at Closing ("the Unit") has been approved by the shareholders

and creditors of both JCCL and the Company and also the Hon'ble Bombay High Court and the Hon'ble

Allahabad High Court. The Competition Commission of India had earlier approved the proposed combination.

The Scheme is now subject to the final approval of the Securities and Exchange Board of India.

• The Company’s wholly-owned subsidiary ‘UltraTech Cement Middle East Investments Limited’ (UCMEIL) has

completed the acquisition of the balance equity stake of ETA Star Companies having operations in United

Arab Emirates (UAE), Bahrain and Bangladesh. With this, the ETA Star Cement Companies have become

wholly owned subsidiaries of UCMEIL.

• For the year, the combined cement and clinker sales of grey cement is 41.47MMT (40.65 MMT), while for

white cement and wall care putty it is 11.42LMT (10.18LMT).

• During the Quarter, the Company allotted 11,430 equity shares of Rs. 10/- each to the option grantees

pursuant to the exercise of options under the Company's Employees Stock Option Scheme - 2006.

• UltraTech Concrete, a division of UltraTech Cement Ltd, recently supplied whitetopping concrete for the

Nandi Infrastructure Corridor Enterprise (NICE) Road in Bangalore, Karnataka. The 9.5 Km link road and 4

km peripheral road will connect to the proposed 111 Km Bangalore Mysore Industrial Corridor (BMIC)

expressway.

Capex

During the year the Company has commissioned

� Clinkerisation plant of 3.30 mtpa, 25 MW TPP and 1.45 mtpa cement plant at Rajashree Cement in

Karnataka;

� 1.6 mtpa cement mill at Jharsuguda in Odisha;

� 25 MW TPP in Andhra Pradesh;

� 30 MW TPP in Rawan in Chhattisgarh and

� 6.5 MW Waste Heat Recovery System at Awarpur in Maharashtra.

With the commissioning of these units the cement capacity of the Company stands raised to 53.95 mtpa.

COMPANY PROFILE

UltraTech Cement Limited, an Aditya Birla Group cement major, is among the top 10 producers of cement in the

world and the largest in India with a capacity of 53.95 million tonnes. With around INR 202798.00 million in

revenues, UltraTech and its subsidiaries have a presence in 5 countries through 11 composite plants, 1 white

cement plant, 1 wall care putty plant, 1 clinkerisation plant in the UAE, 15 grinding units (11 in India, 2 in UAE

and 1 each in Bahrain and Bangladesh) and 6 bulk terminals (5 in India and 1 in Sri Lanka) and 101 RMC plants.

Most of the plants have ISO 9001, ISO 14001 and OHSAS 18001 certification. In addition, two plants have

received ISO 27001 certification and four have received SA 8000 certification. It is also the largest producer of

white cement, wall care putty and ready mix concrete in India. UltraTech offers solutions for the construction

industry with its presence in building products - dry mix mortar, concrete blocks and water proofing. UltraTech

stands for premium quality, reliability, green technology and innovation, making it the choice of every discerning

engineer and consumer.

UltraTech’s subsidiaries are Dakshin Cements Limited, Harish Cement Limited, Gotan Limestone Khauj Udyog

Private Limited, Bhagwati Limestone Company Private Limited, UltraTech Cement Lanka (Pvt.) (Ltd.), UltraTech

Cement Middle East Investments Limited, PT UltraTech Mining Indonesia and PT UltraTech Investments

Indonesia.

Business Area

The company exports over 2.5 million tonnes per annum, which is about 30 per cent of the country's total

exports. UltraTech's products include Ordinary Portland cement, Portland Pozzolana cement and Portland blast-

furnace slag cement.

Products

UltraTech Cement

UltraTech Cement is the ultimate 360º building materials destination, providing an array of products ranging

from grey cement to white cement, from building products to building solutions and an assortment of ready mix

concretes catering to varied needs and applications.

UltraTech Concrete

UltraTech's Specialty Concrete is concrete specially designed to achieve one or more property, behavior,

composition or performance. It is usually superior when compared to conventional concrete. Specialty concrete

has multiple applications. It is designed specifically for a typical end application in a project. Specialty concrete

needs special.

UltraTech Building Products

UltraTech Building Products offers a complete portfolio of end-to-end solutions, covering the entire spectrum of

construction. With products that include SEAL & DRY (total waterproofing solution) and SUPERSTUCCO

(polymer modified mortar)

UltraTech Building Solution

The company has seen a major shift in market dynamics, especially when it comes to distribution channels.

Companies relying solely on traditional modes of distribution (Agents, Stockists and Dealers) have increasingly

forayed into retail to actively engage with the end consumer.

Birla White cement

Birla White cement offers a pristine white canvas for crafting architectural elegance. Its exceedingly high

refractive index and high opacity imparts brilliant lustre and a smooth finish to surfaces, even when blended

with pigments. It gives the freedom to create designs with a wide palette of colours, textures, shapes and sizes.

FINANCIAL HIGHLIGHT (STANDALONE) (A*- Actual, E* -Estimations & Rs. In Millions)

Balance Sheet as at March31, 2013 -2016E

FY13A FY14A FY15E FY16E

SOURCES OF FUNDS

Shareholder's Funds

Share Capital 2741.80 2742.40 2742.40 2742.40

Reserves and Surplus 149606.40 168232.70 190102.95 212915.31

1. Sub Total - Net worth 152348.20 170975.10 192845.35 215657.71

Non Current Liabilities

Long term borrowings 38939.20 44935.80 48530.66 51442.50

Deferred Tax Liabilities 19059.20 22958.30 26172.46 28527.98

Other Long term Liabilities 18.10 23.00 27.60 31.74

Long Term Provisions 1340.20 1379.40 1420.78 1491.82

2. Sub Total - Non Current Liabilities 59356.70 69296.50 76151.51 81494.05

Current Liabilities

Short Term Borrowings 5687.60 3792.00 2995.68 2576.28

Trade Payables 21934.30 24242.20 25939.15 27495.50

Other Current Liabilities 25409.00 20884.10 17751.49 15266.28

Short Term Provisions 9351.80 8350.20 8600.71 9030.74

3. Sub Total - Current Liabilities 62382.70 57268.50 55287.03 54368.81

Total Liabilities (1+2+3) 274087.60 297540.10 324283.88 351520.56

APPLICATION OF FUNDS

Non-Current Assets

a) Fixed Assets 166277.30 179134.70 189882.78 201587.04

b) Non-current investments 19817.70 16623.30 18618.10 20479.91

c) Long Term loans and advances 9831.70 11805.40 13694.26 15474.52

1. Sub Total - Non Current Assets 195926.70 207563.40 222195.14 237541.46

Current Assets

Current Investment 31269.50 37293.40 42887.41 48462.77

Inventories 23504.70 23683.60 25578.29 27368.77

Trade receivables 10172.40 12810.20 15387.94 18157.77

Cash and Bank Balances 1426.60 2775.00 3441.00 3991.56

Short-terms loans & advances 11731.10 13261.90 14588.09 15755.14

Other current assets 56.60 152.60 206.01 243.09

2. Sub Total - Current Assets 78160.90 89976.70 102088.74 113979.10

Total Assets (1+2) 274087.60 297540.10 324283.88 351520.56

Annual Profit & Loss Statement for the period of 2013 to 2016E

Value(Rs.in.mn) FY13A FY14A FY15E FY16E

Description 12m 12m 12m 12m

Net Sales 201749.40 202798.00 219021.84 232163.15

Other Income 3050.00 3290.40 3454.92 3593.12

Total Income 204799.40 206088.40 222476.76 235756.27

Expenditure -154994.60 -164619.00 -176969.65 -184801.87

Operating Profit 49804.80 41469.40 45507.11 50954.40

Interest -2097.10 -3191.70 -3766.21 -4368.80

Gross profit 47707.70 38277.70 41740.91 46585.60

Depreciation -9453.70 -10522.60 -11259.18 -11822.14

Profit Before Tax 38254.00 27755.10 30481.73 34763.46

Tax -11699.70 -6310.40 -6797.42 -7995.60

Net Profit 26554.30 21444.70 23684.30 26767.86

Equity capital 2741.80 2742.40 2742.30 2742.30

Reserves 149606.40 168232.70 190102.95 212915.31

Face value 10.00 10.00 10.00 10.00

EPS 96.85 78.20 86.37 97.61

Quarterly Profit & Loss Statement for the period of 30th Sep, 2013 to 30th June, 2014E

Value(Rs.in.mn) 30-Sep-13 31-Dec-13 31- Mar-14 30-Jun-14E

Description 3m 3m 3m 3m

Net sales 45218.70 48178.50 59598.80 56022.87

Other income 376.10 681.40 577.40 635.14

Total Income 45594.80 48859.90 60176.20 56658.01

Expenditure -38424.00 -40222.20 -46888.40 -43977.95

Operating profit 7170.80 8637.70 13287.80 12680.06

Interest -887.50 -904.50 -739.40 -850.31

Gross profit 6283.30 7733.20 12548.40 11829.75

Depreciation -2572.50 -2644.80 -2784.50 -2868.04

Profit Before Tax 3710.80 5088.40 9763.90 8961.71

Tax -1069.70 -1390.80 -1383.90 -1792.34

Net Profit 2641.10 3697.60 8380.00 7169.37

Equity capital 2742.10 2742.30 2742.40 2742.40

Face value 10.00 10.00 10.00 10.00

EPS 9.63 13.48 30.56 26.14

Ratio Analysis

Particulars FY13A FY14A FY15E FY16E

EPS (Rs.) 96.85 78.20 86.37 97.61

EBITDA Margin (%) 24.69% 20.45% 20.78% 21.95%

PBT Margin (%) 18.96% 13.69% 13.92% 14.97%

PAT Margin (%) 13.16% 10.57% 10.81% 11.53%

P/E Ratio (x) 22.41 27.76 25.13 22.24

ROE (%) 17.43% 12.54% 12.28% 12.41%

ROCE (%) 30.08% 23.66% 23.23% 23.28%

Debt Equity Ratio 0.29 0.28 0.27 0.25

EV/EBITDA (x) 12.82 15.46 14.14 12.66

Book Value (Rs.) 555.65 623.45 703.22 786.41

P/BV 3.91 3.48 3.09 2.76

Charts

OUTLOOK AND CONCLUSION

� At the current market price of Rs.2170.50, the stock P/E ratio is estimated 25.13 x FY15E and 22.24 x FY16E

respectively.

� Earning per share (EPS) of the company for the earnings for FY15E and FY16E is seen at Rs.86.37 and

Rs.97.61 respectively.

� Net Sales of the company are expected to grow at a CAGR of 5% over 2013 to 2016E respectively.

� On the basis of EV/EBITDA, the stock trades at 14.14 x for FY15E and 12.66 x for FY16E.

� Price to Book Value of the stock is expected to be at 3.09 x and 2.76 x respectively for FY15E and FY16E.

� We recommend ‘BUY’ in this particular scrip with a target price of Rs.2344.00 for Medium to Long term

investment.

INDUSTRY OVERVIEW

India's potential in infrastructure is vast and cement plays a vital role in the growth and development of the

nation. India is the second largest producer of cement in the world. The cement industry has been expanding on

the back of increasing infrastructure activities and demand from housing sector over the past many years.

India's cement sector had clocked a 5.6 per cent growth in 2012–13 and projects a growth of 5–6 per cent in the

next fiscal, which would be supported by an expected increase in demand from the rural sector and tier II and

tier III cities, as per India Ratings and Research report. An investment allowance for infrastructure projects of Rs

100 crore (US$ 16.05 million) and above has also been announced by the Government. In addition, cement

production in India is expected to touch 407 million tonnes (MT) by 2020.

Market Size

Cement consumption in India is expected to rise by 8–9 per cent over the next year, taking the estimated cement

consumption in 2013–14 to about 280–285 MT, from around 260 MT in the 2012–13 fiscal, as per the Cement

Manufacturers Association (CMA).

The cement industry may continue to witness a steady market for the better half of the year with fresh capacity

of 20 MT going on stream in 2014, taking the industry capacity to 370 MT.

The Indian cement sector is expected to witness positive growth in coming years, with demand set to increase at

compound annual growth rate (CAGR) of more than 8 per cent during 2013–14 to 2015–16.

The cement and gypsum products sector in India has attracted foreign direct investments (FDI) worth US$

2,879.95 million between April 2000 to November 2013, according to the Department of Industrial Policy and

Promotion (DIPP).

Investments

• Bhutan's Dungsam Cement Corporation Ltd has made a foray into the Northeastern market. The company

is selling cement under the brand name of Dragon Cement.

• ACC has inaugurated a blended cement plant at Padubidri in Udupi district in Karnataka. The new facility

has a capacity of 30,000 tonnes per month and will cater to the cement requirements in coastal

Karnataka and Kerala.

• UltraTech has received the green signal from the Competition Commission of India (CCI) for its US$ 605

million agreement with Jaypee Cement Corporation to purchase its Gujarat-based businesses.

• Ambuja Cement has launched its first fully automatic 1 MT capacity terminal in Mangalore, Karnataka.

“Through this new facility all States along the west coast are now covered by Ambuja Bulk Cement

Terminals (BCTs).

• UltraTech Cement, an Aditya Birla group company, has announced plans to set up two cement plants

entailing investments of over Rs 5,000 crore (US$ 802.57 million).

• UltraTech Cement's plant and 75 megawatt (MW) captive power plant, with an investment of Rs 2,500

crore (US$ 401.28 million), have received approval from the Expert Appraisal Committee (EAC), under

the Ministry of Environment. The cement plant in the Karur and Dindigul districts of Tamil Nadu will be

spread over 136.23 hectares (ha).

• The CCI has approved the proposed acquisition of cement plants of Jaypee Cement Corporation Ltd,

comprising an integrated cement unit at Sewagram and grinding unit at Wanakbori in Gujarat by

Ultratech Cement Ltd.

Government Initiatives

The housing segment accounts for a major portion of the total domestic demand for cement in India. The

Government of India (GoI) is strongly focused on infrastructure development to boost economic growth and

plans to increase investment in infrastructure to US$ 1 trillion in the 12th Five Year Plan (2012–17). During the

Plan, the industry is estimated to add a capacity of 150 MT.

An EAC under the Ministry of Environment, Go I, has given its approval to India Cements to double its capacity

and set up a 40 megawatt (MW) power plant at one of its facilities in Tamil Nadu at a cost of Rs 810 crore (US$

130.01 million). The proposed expansion project will come up at Dalavoi in Ariyalur district.

Giving impetus to the market, the Goa State Pollution Control Board (GSPCB) has signed a memorandum of

understanding (MoU) with Vasavdatta Cement, a company with its plant in Karnataka. The firm would use the

plastic waste collected by the state agencies and village panchayats from Goa as fuel for its manufacturing plant.

Road Ahead

India has the capacity to become the world's third largest construction market by 2025 and a US$ 1 trillion

market.

The focus of the government on strengthening infrastructure, promotion of low-cost affordable housing, etc, is

expected to drive cement demand.

With the ever-increasing industrial activities, real estate, construction and infrastructure, in addition to the onset

of various Special Economic Zones (SEZs) being developed across the country, there is a continuous demand for

cement.

Moreover, major cement manufacturers in India are also increasingly using alternate fuels, especially bioenergy,

to fire their kilns. The step will not only help to reduce production costs of cement companies, but is also proving

effective in reducing emissions.

Disclaimer:

This document prepared by our research analysts does not constitute an offer or solicitation for the purchase or sale

of any financial instrument or as an official confirmation of any transaction. The information contained herein is

from publicly available data or other sources believed to be reliable but do not represent that it is accurate or

complete and it should not be relied on as such. Firstcall India Equity Advisors Pvt. Ltd. or any of it’s affiliates shall

not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the

information contained in this report. This document is provide for assistance only and is not intended to be and must

not alone be taken as the basis for an investment decision.

Firstcall India Equity Research: Email – info@firstcallindia.com

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