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IDBI Capital
UltraTech Cement (Accumulate)
CMP: ₹3,570.6
Target: ₹3,847
Apartment from cement manufacturing, UltraTech Cement focuses on various areas, including alternative fuels, waste heat recovery systems, carbon dioxide emission reduction, waste management, water re-cycling and bio-diversity management.
Driven by lower raw material cost, UltraTech Cement EBITDA came 15 per cent higher than our estimate in Q4FY20. For the quarter EBITDA/t increase of ₹200 q-o-q to ₹1,190, was supported by realisation increase of 1 per cent q-o-q and lower opex by 3 per cent q-o-q.
UltraTech Cement has witnessed sharp rebound in its utilisation in May-20 and at company level plants are operating at utilisation of 65-70 per cent. Though, utilisation is uneven with West region plant utilisation is weak and East region is highest at 90 per cent+. We understand, higher utilisation is led by pent up and rural demand before monsoon commence.
Balance sheet deleveraging has continued, UltraTech’s consolidate net debt reduced by ₹5,200 crore to ₹16,800 crore in FY20. Company has set target of net debt/EBITDA of 1x vs 1.6x currently.
We retain our estimate and ‘accumulate’ rating with unchanged target price of ₹3,847, based on 13x FY22E EV/EBITDA multiple. Positive in UltraTech business model is its leadership position as every fourth bag sold in India is from UltraTech Cement.
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