UltraTech Cement Q3FY22 Review - Outlook positive; Hold
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 Ultratech Cement (UTCEM) Q3FY22 EBITDA was lower than our/consensus estimate by 17%/11%. Weak result is led by weak volume (down 3% YoY) and cost inflation as EBITDA/t was lower by Rs 210/t QoQ at Rs 1,041 in Q3FY22. This has led us to cut EBITDA for FY22E / 23E by 11% / 3%. But despite the cut in FY22E est., we expect EBITDA/t to improve QoQ in Q4FY22 by Rs180/t. This is led by price hike and uptick in volume witnessed in Jan-22, as UTCEM plant operating at utilisation of 85% vs average of 75% for Q3FY22, stated IDBI Capital Equity Research.
"We have maintained FY24E estimate and TP of Rs 7,663 (valuing at 13x FY24E EV/EBITDA). From valuation perspective we are valuing at its +1STD to arrive at TP. But given negligible upside we have Hold rating. Capex outlook in Budget, sustenance of demand and Price hike is the key catalyst for stock performance," it added.
Key highlights and investment rationale
Q3FY22 snapshot: UTCEM Q3FY22 revenue increased by 6% YoY to Rs 130 billion, with volume declining by 3% YoY and ASP increasing by 9% YoY. EBITDA at Rs 24 billion, down 22% YoY is led by cost inflation. EBITDA margin was lower at 19% versus. 25% YoY and PAT was up 8% YoY at Rs 17 billion (led by tax write back).
Demand trend: In Q3FY22, baring north all other region witnessed demand weakness. Trade vol. was weak versus non trade but Demand has improved in Jan-22 with onset of the peak season and rising construction activities.
Capex plan intact: Post commissioning 3.2mtpa capacity in 9MFY22, UTCEM has re-iterated its plan to commission remaining 16mtpa in FY23E. It sees no delay from covid related disruption. And thus, FY23E to witness its installed capacity to increase by 13% YoY to reach 136mtpa. Post the commissioning its capacity market share to increase by ~200bps to 24% at an all India level.
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