4QFY2013 Result Update | Cement

April 22, 2013

UltraTech
Performance Highlights
Quarterly results (Standalone)
Y/E March (` cr) Net sales Operating profit OPM (%) Net profit 4QFY2013 5,389 1,282 23.4 726 3QFY2013 4,857 1,049 21.5 601 % Chg qoq 10.9 22.2 195 20.9 4QFY2012 5,337 1,319 24.5 867 % Chg yoy 1.0 (2.8) (104) (16.3)

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Net Debt Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 51,512 1,195 0.7 2075/1255 11,331 10 19,170 5,834 ULTC.BO UTCEM@IN

`1,879 -

Source: Company, Angel Research

UltraTech Cement (UltraTech)s 4QFY2013 bottom-line performance was in-line with our estimates. The company posted a 16% yoy decline in its bottom-line to `726cr, as volumes fell by 3.6% yoy and operating costs/tonne rose by 6.6% on a yoy basis. We remain Neutral on the stock. OPM at 23.4%: UltraTechs 4QFY2013 stand-alone top-line was flat on a yoy basis and was below estimates on account of both lower-than-estimated volumes and realization. The companys cement volumes (grey and white cement) fell 3.6% yoy to 11.4mn tonne. Blended realizations for the quarter stood at `4,727/tonne, higher by 4.6% on a yoy basis, although flat on a sequential basis. While the operating cost/tonne rose by 6.6% yoy, it fell by 0.9% on a qoq basis, resulting in a better-than-estimated operating profit. The lower operating cost/tonne was on account of a steep 10.6% qoq decline (down 8.1% yoy) in P&F cost/tonne. Interest expenses too were lower by 18.4% yoy at `48cr. During the quarter, the companys tax expenses included additional charges of `87cr towards deferred tax liability due to increase in the rate of surcharge. Outlook and valuation: We expect UltraTech to post an 11.7% and 9.3% CAGR in its top-line and bottom-line over FY2013-15, respectively. At the current levels, the stock is trading at an EV/tonne of US$159 on FY2015 capacity, which we believe is fair. We continue to remain Neutral on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 62.0 4.6 22.9 10.5

Abs. (%) Sensex UTCEM

3m (4.1) (3.8)

1yr 10.3 28.6

3yr 9.1 68.4

Key financials (Standalone)

Y/E March (` cr) Net sales % chg Net profit % chg FDEPS (`) OPM (%) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/Tonne (US $) EV/EBITDA (x)
Source: Company, Angel research

FY2012 18,166 37.5 2,446 74.2 89.3 22.8 21.0 4.0 20.8 18.3 2.9 212 12.7

FY2013E 20,018 10.2 2,750 12.4 100.3 23.0 18.7 3.4 19.6 17.6 2.6 192 11.4

FY2014E 21,868 9.2 2,908 5.8 106.1 23.8 17.7 2.9 17.7 16.3 2.5 168 10.6

FY2015E 24,960 14.1 3,285 12.9 119.8 23.8 15.7 2.5 17.3 16.7 2.1 159 8.8

V Srinivasan
022-39357800 Ext 6831 v.srinivasan@angelbroking.com

Please refer to important disclosures at the end of this report

UltraTech Cement | 4QFY2013 Result Update

Exhibit 1: 4QFY2013 performance (Standalone)

Y/E March (` cr) Net Sales Other operating Income Total Operating Income Net raw-material costs (% of sales) Power & fuel (% of sales) Staff costs (% of sales) Freight & forwarding (% of sales) Other expenses (% of sales) Total Expenditure Operating Profit OPM (%) Interest Depreciation Other Income PBT (excl. Extr. Items) PBT Provision for Taxation (% of PBT) Reported PAT PATM (%) EPS (`)
Source: Company, Angel Research

4QFY2013 5,389 83 5,472 850 15.8 1,056 19.6 261 4.8 1,196 22.2 828 15.4 4,190 1,282 23.4 48 246 100 1,089 1,089 363 33.3 726 13.5 26.5

3QFY2013 4,857 25 4,882 664 13.7 1,083 22.3 244 4.5 1,059 19.6 783 14.5 3,833 1,049 21.5 52 239 96 854 854 254 29.7 601 12.4 21.9

% Chg qoq 10.9 235.6 12.1 27.9 (2.5) 6.8 12.9 5.7 9.3 22.2 195 (8.2) 3.0 4.2 27.4 27.4 42.9 20.9 20.9

4QFY2012 5,337 55 5,392 769 14.4 1,190 22.3 220 4.1 1,089 20.2 805 14.9 4,073 1,319 24.5 59 233 145 1,172 1,172 305 26.0 867 16.3 31.7

% Chg yoy 1.0 50.7 1.5 10.5 (11.3) 18.8 9.8 2.9 2.9 (2.8) (104) (18.4) 5.4 (30.7) (7.1) 18.9 (16.3) (16.3)

FY2013 14,629 73 14,702 2,060 14.1 3,243 22.2 707 13.1 3,028 56.2 2,271 42.1 11,310 3,392 23.1 162 699 206 2,737 2,737 807 29.5 1,929 13.2 70.4

FY2012 12,825 101 12,926 1,807 14.1 3,120 24.3 612 11.3 2,649 49.2 1,909 35.4 10,097 2,828 21.9 165 669 227 2,221 2,221 642 28.9 1,579 12.3 57.6

% Chg 14.1 (27.9) 13.7 14.0 3.9 15.7 14.3 18.9 12.0 19.9 (2.1) 4.5 (9.3) 23.2 23.2 25.8 22.2 -

Exhibit 2: Financial performance

(` cr) 6,400 5,600 4,800 4,000 3,200 2,400 1,600 800 0 2QFY12 3QFY12 4QFY12 1QFY13 Net Profit 2QFY13 3QFY13 OPM (RHS) 4QFY13 Net sales Source: Company, Angel Research 279 616 867 778 550 601 726 4,568 3,981 5,392 5,075 5389 4,700 4,857 27 24 21 18 15 12 (%) 30

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Exhibit 3: 4QFY2013 Actual vs Angel Estimates

(` cr) Net sales Operating profit Net profit
Source: Company, Angel Research

Actual 5,389 1,282 726

Estimates 5,731 1,234 731

Variation (%) (6.0) 3.9 (0.6)

Performance highlights
Net sales flat on a yoy basis
UltraTechs 4QFY2013 stand-alone top-line was flat on a yoy basis and was below estimates on account of both lower-than-estimated volumes and realization. The companys cement volumes (grey and white cement) fell 3.6% yoy 11.4mn tonne. Blended realizations for the quarter stood at `4,727/tonne, higher by 4.6% on a yoy basis. However, blended realizations remained flat on a sequential basis.

OPM down on a yoy basis

While the blended realizations rose by 4.6% yoy, operating cost/tonne rose by 6.6% yoy. However, operating cost/tonne fell by 0.9% on a qoq basis, resulting in a better-than-estimated operating profit. The lower operating cost/tonne was on account of a steep 11.6% qoq decline in P&F costs/tonne.

Per-tonne analysis

During 4QFY2013, UltraTechs realization per tonne rose by 4.6% yoy to `4,727. The raw material cost/tonne increased by 26.5% yoy. The power and fuel cost/tonne declined by 8.1% on a yoy basis due to fall in imported coal prices. The freight cost/tonne rose by 13.7% yoy. The companys operating profit/tonne fell by 1.7% yoy to `1,052, during the quarter.

Exhibit 4: Operational performance

Particulars (`) Realization/tonne Raw-material cost/tonne P&F cost /tonne Freight cost/tonne Other costs Operating costs Operating profit/tonne 4QFY2013 3QFY2013 4QFY2012 chg (%) yoy chg (%) qoq
4,727 629 926 1,049 726 3,675 1,052 4,701 700 1,048 1,025 758 3,710 991 4,519 497 1,008 922 682 3,448 1,070 4.6 26.5 (8.1) 13.7 6.6 6.6 (1.7) 0.6 (10.2) (11.6) 2.3 (4.2) (0.9) 6.1

Source: Company, Angel Research

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Investment arguments
Indias largest cement manufacturer: Post the merger of Samruddhi (erstwhile cement division of Grasim) with itself, UltraTech is now Indias largest cement player with a pan-India presence. The company has also acquired a controlling stake in Dubai-based ETA Star. ETA Stars manufacturing facilities include a 2.3mtpa clinkerization plant and a 2.1mtpa grinding capacity in UAE, and 0.4mtpa and 0.5mtpa grinding facilities in Bahrain and Bangladesh, respectively. UltraTech has a capital outlay of `10,400cr to be spent over setting up additional clinkerization plants at Chattisgarh and Karnataka along with grinding units and bulk packaging terminals across various states. Post these expansions, the companys total capacity is expected to increase by 10.2mtpa, which is expected to be operational by FY2014. Out of the proposed exspansions, the company has

already commissioned a 3.3mtpa clinkerisation plant in Raipur and a 1.6mtpa grinding unit in Solapur. The company has also increased the capacity of its Gujarat plant by 0.6mtpa. These additions have taken the companys domestic cement capacity to 50.9mtpa.
Increased use of captive power to protect margins: Currently, UltraTech has 504MW of power capacity. The company is planning to expand its capacity by 70MW. Increased use of captive power for its overall power requirements would help the company to maintain healthy operating margins.

Outlook and valuation:

We expect UltraTech to post a 11.7% and 9.3% CAGR in its top-line and bottomline over FY2013-15, respectively. At the current levels, the stock is trading at an EV/tonne of US$159 on FY2015 capacity, which we believe is fair. We continue to remain Neutral on the stock.

Exhibit 5: EV/tonne band

600,000 500,000 400,000 300,000 200,000 100,000 0 Mar-06 Mar-07 Mar-08 Mar-09 Mar-10 Mar-11 Mar-12 Nov-06 Nov-07 Nov-08 Nov-09 Nov-10 Nov-11 Nov-12 Mar-13 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 EV/tonne $80 $120 $160 $200

Source: BSE, Company, Angel Research

April 22, 2013

EV(` mn)

UltraTech Cement | 4QFY2013 Result Update

Exhibit 6: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Madras Cement Shree Cements UltraTech Cements Reco Acc. Neutral Neutral Buy Neutral Neutral Neutral CMP (`) 1,214 188 83 92 232 4,356 1,879 Tgt. Price (`) 1,361 143 Upside (%) 12.1 54.8 FY2015E P/BV (x) 2.5 2.7 0.7 0.6 1.6 2.6 2.5 FY2015E P/E (x) 12.3 14.7 7.7 4.2 8.2 11.6 15.7 FY2013-15E EPS CAGR 15.0 11.7 24.6 13.9 24.6 12.5 9.3 FY201E RoE (%) 21.4 19.4 8.8 15.8 21.3 25.2 17.3 EV/tonne^ US $ 115 160 63 34 86 138 184

Source: Company, Angel Research; Note: *Y/E December; ^ Computed on TTM basis

Company Background
UltraTech became India's largest cement player on a standalone basis, with total capacity of 48.8mtpa, post the merger of Samruddhi (erstwhile cement division of Grasim) with itself in 2010. UltraTech also acquired a controlling stake in Dubai-based ETA Star (cement capacities of 3mtpa in the Middle East and Bangladesh) in 2010, which took its consolidated total capacity to 51.8mtpa. UltraTech is a pan-India player, with 22 cement plants spread across the country.

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Profit and Loss statement (Standalone)

Y/E March (` cr) Net Sales Other operating inc. Total operating income % chg Total Expenditure Net Raw Materials Other Mfg costs Personnel Other EBITDA % chg (% of Net Sales) Depreciation& Amort. EBIT % chg (% of Net Sales) Interest & other Charges Other Income (% of PBT) Recurring PBT % chg Extraordinary Exp./(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) ADJ. PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2010 7,050 67 7,116 10.4 5,079 1,023 1,431 251 2,375 2,038 15.5 29 388 1,650 14.4 23.4 118 56 4 1,588 16.7 1,588 494.9 31 1,093 1,093 11.9 15.5 88 88 11.9 FY2011 13,210 164 13,374 87.9 10,668 1,855 3,123 667 5,023 2,707 32.8 20.5 766 1,941 17.7 14.7 277 122 7 1,786 12.5 1,786 382.0 21 1,404 1,404 28.4 10.6 51 51 (41.7) FY2012 18,166 147 18,313 36.9 14,166 2,576 4,304 831 6,454 4,147 53.2 22.8 903 3,245 67.2 17.9 224 372 11 3,393 90.0 3,393 946.7 28 2,446 2,446 74.2 13.5 89 89 74.2 FY2013 FY2014E 20,018 92 20,110 9.8 15,499 2,910 4,299 968 7,323 4,610 11.2 23.0 945 3,665 12.9 18.3 210 465 12 3,920 15.5 3,920 1,170.0 30 2,750 2,750 12.4 13.7 100 100 12.4 21,868 78 21,947 9.1 16,745 3,176 4,490 1,085 7,995 5,201 12.8 23.8 1,267 3,934 7.3 18.0 240 436 11 4,130 5.4 4,130 1,221.9 30 2,908 2,908 5.8 13.3 106 106 5.8 FY2015E 24,960 89 25,049 14.1 19,102 3,626 5,083 1,258 9,135 5,948 14.4 23.8 1,409 4,538 15.4 18.2 247 374 8 4,665 12.9 4,665 1,380.1 30 3,285 3,285 12.9 13.2 120 120 12.9

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Balance Sheet (standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity Share Capital Reserves& Surplus Shareholders Funds Total Loans Deferred Tax Liability Other long term liab. Long term priovisisons Total Liabilities APPLICATION OF FUNDS Gross Block Less: Acc. Depreciation Net Block Capital Work-in-Progress Goodwill Investments Long term loans and adv. Current Assets Cash Loans & Advances Other Current liabilities Net Current Assets Mis. Exp. not written off Total Assets 1,472 84 351 1,038 1,299 173 7,044 8,078 3,136 4,942 259 1,670 17,942 6,542 11,401 682 3,730 562 3,619 145 904 2,570 3,339 280 16,655 19,014 7,380 11,634 1,897 3,789 1,462 4,161 188 1,164 2,809 4,071 90 18,873 20,014 8,325 11,689 4,939 5,109 1,462 4,210 143 694 3,373 4,737 (527) 22,672 28,014 9,592 18,422 1,939 4,209 1,462 4,911 276 985 3,650 5,224 (312) 25,720 31,153 11,001 20,151 3,200 4,209 1,462 5,636 202 1,273 4,160 5,930 (294) 28,728 124 4,484 4,609 1,605 831 7,044 274 10,392 10,666 4,125 1,730 22 112 16,655 274 12,586 12,860 4,119 1,738 35 121 18,873 274 14,961 15,235 5,375 1,906 35 121 22,672 274 17,359 17,633 6,025 1,906 35 121 25,720 274 20,067 20,341 6,325 1,906 35 121 28,728 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Cash flow statement (Standalone)

Y/E March (` cr) Profit before tax Depreciation Change in Working Capital Add: Interest expenses Less: Other income Direct taxes paid Cash Flow from Operations (Inc)/ Decin Fixed Assets (Inc)/ Dec in Investments Other income Cash Flow from Investing Issue of Equity Inc./(Dec.) in loans Dividend Paid (Incl. Tax) Others Cash Flow from Financing Inc./(Dec.) in Cash Opening Cash balances Closing Cash balances FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E 1,588 388 (90) 118 56 389 1,559 (259) (635) 56 (838) (537) 87 118 (742) (21) 104 84 1,786 766 (93) 277 122 519 2,095 (1,223) (542) 122 (1,642) 1 (1) 141 252 (392) 61 84 145 3,393 903 (541) 224 372 947 2,659 (2,286) (58) 372 (1,973) 0 8 255 224 (471) 215 145 360 3,920 945 572 210 465 1,170 4,012 (4,042) (1,320) 465 (4,897) 0 1,256 289 299 668 (217) 360 143 4,130 1,267 (82) 240 436 1,222 3,897 (5,000) 900 436 (3,664) 650 510 240 (100) 133 143 276 4,665 1,409 (91) 247 374 1,380 4,476 (4,400) 374 (4,026) 300 577 247 (524) (74) 276 202

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Key Ratios
Y/E March Valuation Ratio (x) P/E (on FDEPS) P/CEPS P/BV Dividend yield (%) EV/Sales EV/EBITDA EV / Total Assets Per Share Data (`) EPS (Basic) EPS (fully diluted) Cash EPS DPS Book Value Dupont Analysis (%) EBIT margin Tax retention ratio Asset turnover (x) ROIC (Post-tax) Cost of Debt (Post Tax) Leverage (x) Operating ROE Returns (%) ROCE (Pre-tax) Angel ROIC (Pre-tax) ROE Turnover ratios (x) Asset Turnover (Gross Block) Inventory / Sales (days) Receivables (days) Payables (days) WC cycle (ex-cash) (days) Solvency ratios (x) Net debt to equity Net debt to EBITDA Int. Coverage (EBIT / Int.) (0.0) (0.0) 14.0 0.0 0.2 7.0 0.1 0.3 14.5 0.3 0.9 17.5 0.2 0.7 16.4 0.1 0.4 18.3 0.9 39 11 92 3 1.0 38 11 79 3 1.0 40 14 95 0 1.0 40 16 104 (7) 0.9 41 18 109 (10) 0.8 39 17 107 (8) 24.4 33.4 26.6 16.4 22.2 18.4 18.3 24.5 20.8 17.6 23.9 19.6 16.3 20.7 17.7 16.7 21.1 17.3 23.2 68.8 1.1 17.0 4.3 0.5 22.9 14.5 78.6 1.1 13.0 7.6 0.4 15.0 17.7 72.1 1.0 13.3 3.9 0.4 16.6 18.2 70.2 1.0 12.5 3.1 0.3 15.6 17.9 70.4 0.9 11.5 3.0 0.3 14.5 18.1 70.4 0.9 11.8 2.8 0.3 14.8 87.8 87.8 119.0 7.0 370.2 51.2 51.2 79.2 5.1 389.2 89.3 89.3 122.2 9.3 469.2 100.3 100.3 134.8 10.5 555.7 106.1 106.1 152.3 18.6 643.1 119.8 119.8 171.2 21.0 741.9 21.4 15.8 5.1 0.4 3.4 11.7 3.4 36.7 23.7 4.8 0.3 4.0 19.6 3.2 21.0 15.4 4.0 0.5 2.9 12.7 2.8 18.7 13.9 3.4 0.6 2.6 11.4 2.3 17.7 12.3 2.9 1.0 2.5 10.6 2.1 15.7 11.0 2.5 1.1 2.1 8.8 1.8 FY2010 FY2011 FY2012 FY2013E FY2014E FY2015E

April 22, 2013

UltraTech Cement | 4QFY2013 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

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Disclosure of Interest Statement 1. Analyst ownership of the stock 2. Angel and its Group companies ownership of the stock 3. Angel and its Group companies' Directors ownership of the stock 4. Broking relationship with company covered

UltraTech Cement No No No No

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

Ratings (Returns):

Buy (> 15%) Reduce (-5% to -15%)

Accumulate (5% to 15%) Sell (< -15%)

Neutral (-5 to 5%)

April 22, 2013

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