INSUBCONTINENT EXCLUSIVE:
ET Intelligence Group: When there is renewed interest in the stock of a sector leader, it is an indication of improving fundamentals in that
In the three years through this January, the stock had underperformed the Nifty50 index
In the past one month, however, the trajectory has changed and it gained 12.6 per cent against a 1.2 per cent rise in the Nifty.
This new
interest in UltraTech can be attributed to three main factors: improving prices, gains from the assets it acquired in the recent past and
cost savings.
After a long time, cement manufacturers have not only been able to increase prices, but also sustain it
This is a favourable sign as analysts believe the industry is entering a demand cycle wherein manufacturers would be able see improvement in
price realisations at improved utilisation levels
This should boost their operating profit (EBITDA) per tonne in the coming quarters.
In light of these facts, and post-acquisition of key
infrastructurerelated and slightly improved construction activities in real estate (largely low-cost housing)
measures.
The company said its subsidiary, Ultratech Nathdwara (erstwhile Binani Cement with a capacity of 6.25 mt, which it acquired in
November last year) has shown improvement in realisations and capacity utilisations
Century Cement (14.6 MT), by the first quarter of FY20
At present, there is a gap Rs 10-15 per kg between the cement price of Century Cement and UltraTech
Also, the fall in crude oil prices should boost savings for Ultra-Tech that operates multi-fuel plants
In all, the company is expected to save cost by Rs 60-70 per tonne
In times when demand is improving and price hikes are sustaining, the improved performance of its acquired assets and cost savings should
On a one-year forward basis, the stock is trading at an EV/EBIDTA of 14.7, which is a 1.5 per cent discount to its five-year average.
