UltraTech Cement hits 52-week low post September-quarter results

The stock hit a 52-week low of Rs 3,488, down 3.3%, extending its Fridays 3.2% decline on the BSE.

Shares of UltraTech Cement hit a 52-week low of Rs 3,488, down 3.3% on the BSE, after the company reported 11% year on year (Y-o-Y) decline in its consolidated net profit at Rs 3.76 billion in September quarter (Q2FY19), due to higher operating cost. The cement major had profit of Rs 4.24 billion in the same quarter last fiscal. The stock lost 6.5% in past two trading days.

Net sales during the quarter under review grew 20% at Rs 81.11 billion from Rs 67.52 billion over the previous year, on back of strong volume growth. EBITDA per tonne was Rs 769 against Rs 985 in the past year and Rs 848 in the previous quarter.

“Domestic sales volumes jumped 21% over Q2FY18. However, rising energy and logistics cost coupled with rupee depreciation resulted in cost increasing by 14% as compared to Q2FY18, bringing down profits as compared to the previous year,” UltraTech Cement said in a statement.

Going forward, management expects cement price hikes from November, the recent dip in international petcoke prices to benefit P&F costs and benefit of change in axle load norms (7-7.5%) to percolate in freight costs over the next six months.

Analysts at Emkay Global Financial Services maintains ‘accumulate’ rating on the stock with a revised target price of Rs 3,977.

“We are reducing FY19/FY20E EBITDA by 4.4%/4.9% considering input cost pressures. We expect an improvement in pricing power going forward and continue to prefer UltraTech due to its leadership position, focus on improving operational efficiencies, and healthy cash generation,” the brokerage firm said in result update.

“Factoring in lower earnings, we lower our price target to Rs 3,880 (earlier Rs 4040), based on 15xFY20 EV/EBITDA. Despite the recent stock price correction, valuation remains demanding; thus, we maintain 'HOLD' rating on the stock. UltraTech will likely to end another year with sub-Rs 100 of EPS, despite the full-year benefit of a large-sized acquisition. Amid the costs headwinds, cement price recovery (which remains quite uncertain) remains the only key catalyst for the stock uptick,” analysts at Antique Stock Broking said in result review.

“We expect the company to grow faster than the industry on the back of ramp-up of the JP Group acquired assets. Also, the margin profile is expected to expand due to the improvement in the cost structure of the plant and better pricing. However, after factoring in lower-than-expected cement prices, we cut our FY20E earnings by 20% and TP by 8% to Rs 4,494 based on EV per tonne of USD 190 on FY20E capacity. We reiterate our 'Buy' rating,” Elara Capital said in the quarterly update.

At 10:16 am; shares of UltraTech Cement partially erased its early morning losses, trading 2% lower at Rs 3,528 on the BSE. In comparison, the S&P BSE Sensex was up 0.52% at 34,494 points. A combined 296,696 equity shares changed hands on the counter on the BSE and NSE so far.