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Analyst Corner: UltraTech Cement – Maintain ‘reduce’, revise FV to Rs 6,300

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Administration is assured of robust demand restoration and sees the near-term Covid-19 influence as transient.

UltraTech Cement’s 4QFY21 earnings have been greater than our estimates led by stronger volumes (+30% yoy). The corporate has been deleveraging at a formidable tempo and may grow to be web money in FY2022E regardless of development capex. Capability growth and WHRS initiatives are on observe to finish over FY2022-23E and supply robust development visibility.

With a powerful steadiness sheet and administration’s deal with RoE growth, dividend payout has upside threat.
UTCEM’s earnings have been greater than our and consensus estimates—the corporate reported India operations ebitda of Rs 36 billion (+51% yoy , +19% qoq) in opposition to our estimate of Rs 34.5 billion. Volumes elevated by 30% yoy, forward of the business development in the course of the quarter. Realisations elevated to Rs 5,245/tonne (+4% yoy, +1% qoq) on greater premium product gross sales. Ebitda/tonne elevated to Rs 1,356/tonne (+17% yoy, +2% qoq; KIE: Rs 1,346/tonne). For FY2021, ebitda elevated to Rs 113 billion (+25% yoy) or Rs 1,370/tonne (+19% yoy) on greater volumes at 82.6 mn tonne (+5% yoy), greater costs (+1% yoy) and decrease prices (-4% yoy).

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Administration maintained its steering for completion of its 19.5 mtpa grinding and 11.1 mtpa clinker capability expansions by FY2023-end. UTCEM’s capability would enhance to 131 mtpa by FY2023E (capex of $46/tonne) or at a CAGR of 5.5%, forward of business capability rising at 4.4% CAGR. With robust operational money flows, we estimate 5-6% FCF yield in FY2021-24E regardless of development capex and to assist UTCEM grow to be web money optimistic in FY2022E.

Administration is assured of robust demand restoration and sees the near-term Covid-19 influence as transient. We have now revised our ebitda estimates by 2%/0%/1% for FY2022/23/24E and truthful worth to Rs 6,300 (from Rs 6,250) primarily led by greater volumes. We see steadiness risk-reward after the robust rally prior to now three months and see restricted upside at present 12X EV/ebitda (or $180 EV/tonne) on FY2023E. Preserve ‘cut back’.

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