Most analysts maintained their bullish investment recommendation for UltraTech Cement Ltd., citing better-than-expected volume growth, improved realizations and cost cuts.
The cement maker posted 16% sequential growth in volumes in the quarter ended March compared with 2-3.5% growth reported by other Holicim group companies. While its operating profit rose 18.9% sequentially, net profit jumped 12% in the reported quarter.
It even reduced net debt by Rs 10,264 crore for the year ended March. Net debt-Ebitda ratio fell to 0.55x as of March 2021 from 1.72x a year earlier.
Of the 44 analysts tracking the company, 40 have a ‘buy' rating and the remaining four either recommending a ‘hold' or ‘sell', suggesting a potential upside of nearly 9.6%, according to Bloomberg data.
Here's what brokerages have to say about UltraTech's fourth-quarter results...
Nomura
- Retains ‘buy' with a target price of TP of Rs 7,650 apiece.
- Ebitda ahead on stronger volume; PAT impacted by lower other income.
- Strong volume growth; blended realization also marginally better
- Lower power/fuel, freight and staff cost offsets higher other opex, raw material costs.
- Higher realization, lower costs drive further margin expansion.
- Key downside risks: extended lockdowns, delay in commissioning, lower cement prices.
Jefferies
- Recommends ‘hold' rating with a target price of Rs 6,200 apiece.
- The brokerage has an upside scenario of Rs 8,000 and downside at Rs 3,200 apiece.
- Higher-than-expected volume growth and lower costs aided outperformance.
- Net gearing continued to slide down through FY21, a positive.
- Outlook is fairly positive on the medium term.
- Covid-19 clouds the near-term visibility.
- Rs 37-a-share dividend, significantly ahead of the past few years' level.
- Present dividend per share translates into about 20% of pre-ex consolidated earnings.
CLSA
- Maintains ‘outperform' rating.
- Ebitda up 12%/17% versus CLSA/consensus estimates.
- Higher profitability drives beat with costs largely in line.
- Debt continues to decline sharply.
- Stock trades in line with its historical median.
Investec Securities
- Maintains ‘overweight' rating with a target price of Rs 8,000 apiece.
- Broad-based demand recovery in Q4 and potential market share gains a key positive.
- Realizations were better than the brokerage expected and grew quarter-on-quarter.
- Costs/tonne were well controlled, although they could increase in Q1.
Key things, as per CLSA, to watch out for in the company's post-earnings concall...
- Demand outlook for FY22.
- Impact of Covid-19 related shutdowns in various states.
- impact of cost increases on profitability, especially petcoke and international coal.
- Capex and its progress on expansion projects.
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