UltraTech’ Q3FY09 net profits came above our expectations, 20% higher than estimated, mainly due to better-than-estimated realizations and volume growth.
UltraTech’s Q3FY09 revenue was up 18.2% y-o-y to Rs16.3 billion, higher than our estimated Rs15 billion. Volumes climbed 5.7% y-o-y (12.3% q-o-q) to 4.6 million tonnes. Realizations, at Rs3,558 per tonne, rose 11.8% y-o-y and 4% q-o-q.
EBITDA per tonne was Rs940, down 13% y-o-y, though up 29% sequentially. Power and fuel costs per tonne jumped 54% y-o-y, to Rs1,156, as the result of exhausting the high-cost coal inventory. The company expects the benefit of the coal-price decline to be reflected in Q4FY09.
The EPS for FY09 and FY10 have been increased, by 11.9% and 5.1% to Rs72.5 and Rs51, respectively. However, we maintain our estimates for FY11.
We have raised our target price for UltraTech to Rs389 (from Rs354), based on an EV/EBITDA multiple of 5x FY10e. At the current market price of Rs381, it trades at US$64/ton, an EV/EBITDA of 4.9x and a PE of 7.5x FY10 estimates.
High sensitivity to cement prices is expected to weigh on its performance ahead. Hence, we re-iterate a SELL on the counter.