Ultratech Cement beats ACC hands down on volumes growth

ultratech cement

ACC Ltd’s stellar September quarter earnings set the bar higher for its pan-India focused peers. Ultratech Cement Ltd also surprised the Street positively with profit and revenues exceeding Bloomberg’s consensus analysts’ estimates.

Volumes grew 7% year-on-year (y-o-y) basis to 20.1 million tonnes. This is higher than lower single-digit volumes growth that analysts were anticipating. Also, it has significantly beat ACC’s 1% y-o-y volumes growth in the September quarter.

Ultratech Cement said that its rural markets penetration increased by around 5% y-o-y. Dealers’ channel checks showed that cement demand, especially in the individual home building segment was better in smaller towns than metros. Ultratech’s volumes may have gotten a fillip from rural demand. Sequentially, realisations are down by around 2.5% at Rs4874/tonne, but better than expectations, according to Reliance Securities Ltd.

On the operating cost front, akin to ACC, Ultratech has also remained focused on tight cost control. Ultratech Cement’s investors presentation says that its fixed cost fell by 14% y-o-y in the September quarter.

As expected, higher diesel prices pushed the company’s logistics cost higher annually and sequentially. Similarly, costlier fly ash resulted in increased raw material cost y-o-y and q-o-q. Both these components form around 50% of the company’s overall cost structure. Saving grace was energy cost, which declined around 9% y-o-y due to use of low-cost petroleum coke. However, sequentially, energy cost moved up. Analysts expect higher pet coke prices to impact Ultratech Cement towards the end of 3QFY21 as prices in the international market have moved past USD90/tonne. In the September quarter, Ultratech’s pet coke consumption was at $71/t.

Reacting to the earnings, the Ultratech Cement stock rose more than 2% intraday on the NSE on Wednesday. The stock ended Wednesday’s session at ?4,631.95 and is close to reclaiming its 52-week high of Rs4,754.10 seen in January this year.

At a one-year forward Ev/Ebitda the stock is trading at a valuation multiple of 15 times. It is the second most expensive listed Indian cement stock after Shree Cement Ltd. Ev is short for enterprise value. Ebitda stands for earnings before interest, tax, depreciation and amortisation.

News Source:- livemint

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