1QFY2012 Result Update | Cement

July 28, 2011

UltraTech Cement
Performance Highlights
Y/E Mar (` cr) Net sales Operating profit OPM (%) Net profit
Source: Company, Angel Research;

NEUTRAL
CMP Target Price
Investment Period
Stock Info Sector Market Cap (` cr) Beta 52 Week High / Low Avg. Daily Volume Face Value (`) BSE Sensex Nifty Reuters Code Bloomberg Code Cement 28,226 0.6 1175/820 16667 10 18,210 5,488 ULTC.BO UTCEM@IN
4,490 1,087 23.9 727 (2.8) 12.9 401bp (6.0) 3,990 1,033 25.7 558 9.4 18.8 218bp 22.5

`1,030 -

1QFY2012 4QFY2011 % chg qoq 1QFY2011 % chg yoy

4,365 1,227 27.9 683

For 1QFY2012, UltraTech Cement (ULTC) posted robust 22.5% yoy growth in its bottom line to `683cr, aided by an ~11% improvement in blended realisation to `4,503/tonne. The companys domestic dispatches of grey cement (incl. clinker) stood at 9.46mn tonnes, down 1.6% yoy. We remain Neutral on the stock. Strong improvement in realisation leads to stellar operating performance: For 4QFY2011, ULTCs net sales rose by robust 9.4% yoy to `4,365cr on the back of an impressive ~11% improvement in blended realisation to `4,503/tonne. The companys realisation was higher by 6.7% even on a sequential basis and turned out to be a major positive surprise. The company faced margin pressure during

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.4 12.5 16.4 7.8

the quarter on account of increased power and fuel and freight costs. Despite the cost pressures, OPM for the quarter was higher by 218bp yoy and stood at 27.9% on account of better realisation. The companys net profit stood at `683cr, up 22.5% yoy, well ahead of our as well as consensus estimates.
Outlook and valuation: We expect ULTC to post a 22.6% CAGR in its top line over FY201113, aided by higher volumes (FY2011 financials include only nine months of Samruddhis operations). At current levels, the stock is trading at an EV/EBITDA of 6.1x and EV/tonne of US$125 on FY2013 estimates, which we believe is fair. Hence, we maintain our Neutral recommendation on the stock.

Abs. (%) Sensex UltraTech

3m (5.6)

1yr 1.4

3yr 26.9 83.8

(3.2) 20.3

Key financials (Standalone)

Y/E March ( ` cr) Net sales % chg Net profit % chg OPM (%) FDEPS (`) P/E (x) P/BV (x) RoE (%) RoCE (%) EV/Sales (x) EV/tonne (US$) Installed cap (mtpa) EV/EBITDA (x) FY2010 7,050 10.4 1,093 11.9 28.9 87.8 11.7 2.8 26.6 24.4 1.9 119 22 6.5 FY2011 13,210 87.4 1,404 28.4 20.3 51.2 20.1 2.6 18.4 16.3 2.3 136 23 11.3 FY2012E 17,670 33.8 2,126 51.4 23.3 77.6 13.3 2.3 18.4 18.5 1.7 132 49 7.1 FY2013E 19,857 12.4 2,383 12.1 23.1 87.0 11.8 2.0 17.8 18.5 1.4 125 49 6.1

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

Source: Company, Angel Research; Note: FY2010 and FY2011 financials do not include full impact of Samruddhis merger

Please refer to important disclosures at the end of this report

UltraTech Cement | 1QFY2012 Result Update

Exhibit 1: 1QFY2012 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 (incl. extr. items) Provision for taxation (% of PBT) Reported PAT PATM (%) EPS (`)
Source: Company, Angel Research

1QFY2012 4,365 39 4,404 504 11.5 1,037 23.7 184 4.2 769 17.6 684 15.7 3,177 1,227 27.9 73 223 27 958 275 28.7 683 15.6 25

4QFY2011 4,490 66 4,556 632 14.1 966 21.5 217 4.8 821 18.3 834 18.6 3,469 1,087 23.9 83 227 44 821 94 11.5 727 16.2 27

% chg (qoq) (2.8) (40.7) (3.3) (20.3) 7.4 (15.1) (6.3) (18.1) (8.4) 12.9 401bp (12.4) (1.6) (38.7) 16.8 192.8 (6.0) (6.0)

1QFY2011 3,990 33 4,023 514 12.9 891 22.3 169 3.9 763 17.5 653 15.0 2,990 1,033 25.7 79 213 52 794 236 29.7 558 14.0 20

% chg (yoy) 9.4 16.7 9.5 (2.0) 16.3 9.2 0.8 4.7 6.3 18.8 218bp (7.7) 4.6 (48.8) 20.8 16.7 22.5 22.5

FY11 13,210 141 13,351 1,866 14.1 3,123 23.6 667 5.0 2,558 19.4 2,455 18.6 10,668 2,683 20.1 277 766 146 1,786 382 21.4 1,404 10.6 51

FY10 7,050 63 7,113 1,027 14.6 1,430 20.3 253 3.6 1,229 17.4 1,139 16.2 5,078 2,035 28.6 118 388 59 1,588 495 31.2 1,093 15.5 88

% chg 87.4 123.2 87.7 81.7 118.3 163.5 108.2 115.4 110.1 31.9 (851)bp 135.8 97.3 147.6 12.5 (22.8) 28.4 (41.6)

Exhibit 2: Financial performance

4,800 4,000 3,200 4,023 3,245 24 1,923 21 18 229 4QFY10 558 116 1QFY11 2QFY11 727 319 683 15 12 3QFY11 4QFY11 Net Profit 1QFY12 Net operating income
Source: Company, Angel Research

4,556 3,741

4,404

30 27

(` cr)

2,400 1,600 800 0

(%)

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UltraTech Cement | 1QFY2012 Result Update

Performance highlights
Net sales up 9.4% yoy aided by higher realisation
During 1QFY2012, ULTCs net sales rose by 9.4% yoy on account of higher blended realisation. Realisation improved by 11.1% yoy to `4,503/tonne. The
companys realisation was higher by 6.7% even on a sequential basis and turned out to be a major positive surprise. Domestic dispatches of grey cement (incl. clinker) stood at 9.46mn tonnes during the quarter, down 1.6% yoy. The combined sales volume of white cement and wall care putty stood flat at 0.2mn tonnes.

Spike in power and fuel costs keeps margin under pressure ULTC faced margin pressure during the quarter on account of increased power and fuel and freight costs. Despite cost pressures, OPM for the quarter was higher by 217bp yoy and stood at 27.9% due to better realisation. Per-tonne analysis
ULTCs blended realisation per tonne rose by 11.1% yoy to `4,503. Per tonne power and fuel cost rose by 18.1% yoy and 17.8% qoq due to the substantial increase in coal prices both domestically and internationally. Domestic fuel costs rose after the price hike by Coal India during February 2011, the impact of which was felt fully in the current quarter. During 1QFY2012, global coal prices were also higher by ~30% yoy. Freight cost/per tonne rose by 2.4% yoy and 2.8% qoq. The companys operating profit/tonne increased by 20.7% yoy to `1,225.

Exhibit 3: Operating performance

Particulars (`) Realisation/tonne Raw-material cost/tonne Power and fuel cost /tonne Freight cost/tonne Other costs/tonne Operating profit/tonne
Source: Company, Angel Research

1QFY12 4,503 520 1,069 793 705 1,225

4QFY11 4,221 594 908 771 784 960

1QFY11 4,053 522 906 775 663 1,016

%chg yoy 11.1 (0.5) 18.1 2.4 6.3 20.7

% chg qoq 6.7 (12.5) 17.8 2.8 (10.1) 27.7

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UltraTech Cement | 1QFY2012 Result Update

Investment arguments
Indias largest cement manufacturer: Post the merger of Samruddhi (erstwhile cement division of Grasim) with itself, ULTC 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 clinkerisation plant and a 2.1mtpa grinding capacity in the UAE, and 0.4mtpa and 0.5mtpa grinding facilities in Bahrain and Bangladesh, respectively. In addition, ULTC has a capital outlay of `11,000cr to be spent over the next three years for setting up additional clinkerisation 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 9.2mtpa, which is expected to be operational by FY2014. Pan-India presence to insulate ULTC from price volatility: ULTC has been enjoying good brand equity, which has only strengthened post the Samruddhi merger along with being insulated from the wide variations in regional demand and price volatility. Post the merger, ULTC would enjoy synergic benefits by way of superior operating efficiencies due to its larger size. Increased use of captive power to protect margins: Currently, ULTC has 504MW of power capacity. The company is planning to add another 70MW of capacity. Increased use of captive power for its overall power requirements would help the company to maintain healthy operating margins. Outlook and valuation: We expect ULTC to post a 22.6% CAGR in its top line over FY201113, aided by higher volumes (FY2011 financials include only nine months of Samruddhis operations). At current levels, the stock is trading at an EV/EBITDA of 6.1x and EV/tonne of US$125 on FY2013 estimates, which we believe is fair. Hence, we remain Neutral on the stock.

Exhibit 4: Change in estimates

(` cr) Earlier Net Sales Operating Exp Operating Profit Depreciation Interest PBT Tax PAT 18,351 14,679 3,841 870 343 2,824 915 1,909 FY2012 Revised 17,670 13,716 4,116 870 343 3,100 973 2,126 Variation (%) (3.7) (6.6) 7.2 0.0 (0.0) 9.8 6.4 11.4 Earlier 20,704 16,510 4,363 937 368 3,257 1,055 2,202 FY2013 Revised Variation (%) 19,857 15,440 4,580 937 368 3,474 1,091 2,383 (4.1) (6.5) 5.0 0.0 (0.0) 6.7 3.4 8.2

Source: Angel Research

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UltraTech Cement | 1QFY2012 Result Update

Exhibit 4: One-year forward EV/tonne

EV 350,000 300,000 250,000
(` mn)

$70

$90

$110

$130

200,000 150,000 100,000 50,000 0 Apr-06 Apr-07 Apr-08 Apr-09 Apr-10 Apr-11

Source: Company, Angel Research

Exhibit 5: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Madras Cement ULTC Reco. Neutral Neutral Neutral Buy Neutral Neutral CMP (`) 1,020 133 71 46 90 1,030 Tgt. price (`) 57 Upside (%) 25.1 FY2013E P/BV (x) 2.4 2.3 0.6 0.5 1.0 2.0 FY2013E P/E (x) 16.4 15.8 8.1 6.3 8.5 11.8 FY2011-13E EPS CAGR (%) 2.2 1.1 98.6 22.5 8.6 30.3 FY2013E RoCE (%) 19.5 19.3 6.9 7.4 10.0 18.5 FY2013E RoE (%) 15.5 15.2 6.6 7.8 12.4 17.8

Source: Company, Angel Research; Note:* Y/E December

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UltraTech Cement | 1QFY2012 Result Update

Profit and loss statement (Standalone)

Y/E March (` cr) Net sales Other operating income Total operating income % chg Total expenditure Net raw materials Other mfg costs Personnel Other EBITDA % chg (% of net Sales) Depreciation& amortisation EBIT % chg (% of net Sales) Interest & other Charges Other income (% of PBT) Recurring PBT % chg Extraordinary expense/(Inc.) PBT (reported) Tax (% of PBT) PAT (reported) % chg (% of net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2008 FY2009 FY2010 FY2011 FY2012E FY2013E 5,509 62 5,571 13.4 3,789 524 1,240 172 1,854 1,782 26.1 32 237.2 1,545 30.1 28 75.7 37 2 1,507 33.1 1,507 499.4 33 1,007 34.6 18.3 81 81 34.6 6,383 61 6,444 15.7 4,679 616 1,719 218 2,127 1,765 (1.0) 28 323.0 1,442 (6.7) 23 125.5 45 3 1,362 (9.6) 1,362 384.4 28 977 (3.0) 15.3 78 78 (3.0) 7,050 67 7,116 10.4 5,079 1,027 1,427 251 2,375 2,038 15.5 29 388.1 1,650 14.4 23 117.5 56 4 1,588 16.7 1,588 494.9 31 1,093 11.9 15.5 88 88 11.9 13,210 141 13,351 87.6 10,668 1,866 3,123 667 5,013 2,683 31.7 20.3 765.7 1,918 16.3 15 277.1 146 8 1,786 12.5 1,786 382.0 21 1,404 28.4 10.6 51 51 (41.7) 17,670 162 17,832 33.6 13,716 2,343 4,177 850 6,346 4,116 53.4 23.3 870.0 3,246 69.3 18 342.8 197 6 3,100 73.5 3,100 973.3 31 2,126 51.4 12.0 78 78 51.4 19,857 162 20,019 12.3 15,440 2,626 4,713 935 7,166 4,580 11.3 23.1 936.5 3,643 12.2 18 368.4 199 6 3,474 12.1 3,474 1,090.8 31 2,383 12.1 12.0 87 87 12.1

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UltraTech Cement | 1QFY2012 Result Update

Balance sheet (Standalone)

Y/E March (` cr) SOURCES OF FUNDS Equity share capital Reserves& surplus Shareholders funds Total loans Deferred tax liability Total liabilities APPLICATION OF FUNDS Gross block Less: Acc. Depreciation Net block Capital work-in-progress Goodwill Investments Current Assets Cash Loans & advances Other Current liabilities Net current assets Mis. Exp. not written off Total Assets 4,973 2,472 2,500 2,283 171 1,304 101 377 826 1,279 25 4,980 7,401 2,765 4,636 677 1,035 1,372 104 382 886 1,253 119 6,467 8,078 3,136 4,942 259 1,670 1,472 84 351 1,038 1,299 173 7,044 17,117 4,611 12,507 3,730 3,757 145 1,054 2,559 3,454 304 16,541 3,730 5,413 486 1,184 3,744 4,203 1,210 18,576 3,730 6,208 660 1,332 4,217 4,733 1,475 20,904 18,317 5,481 12,836 800 19,717 6,418 13,299 2,400 124 2,573 2,697 1,741 542 4,980 124 3,478 3,602 2,142 723 6,467 124 4,484 4,609 1,605 831 7,044 274 10,392 10,666 4,145 1,730 16,541 274 12,148 12,422 4,425 1,730 18,576 274 14,115 14,389 4,785 1,730 20,904 FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

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UltraTech Cement | 1QFY2012 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 Interest Coverage (EBIT / Int.) 0.5 0.8 20.4 0.3 0.6 11.5 (0.0) (0.1) 14.0 0.0 0.1 6.9 1.1 34 13 98 1 1.0 37 12 99 (2) 0.9 39 11 92 3 1.1 38 11 81 3 34.8 54.1 45.2 25.2 34.8 31.0 24.4 26.6 26.6 16.3 16.6 18.4 27.7 66.9 1.3 23.8 3.0 0.6 35.3 22.4 71.8 1.1 18.4 4.6 0.4 24.1 23.2 68.8 1.1 17.0 4.3 0.1 18.6 14.4 78.6 1.1 12.9 7.6 (0.0) 12.9 80.9 80.9 100.0 5.8 216.6 78.5 78.5 104.4 5.8 289.3 87.8 87.8 119.0 7.0 370.2 51.2 51.2 79.2 7.0 389.2 12.7 10.3 4.8 0.6 2.3 7.0 2.5 13.1 9.9 3.6 0.6 2.2 7.9 2.1 11.7 8.7 2.8 0.7 1.9 6.5 1.9 20.1 13.0 2.6 0.7 2.3 11.3 1.8 FY2008 FY2009 FY2010 FY2011E FY2012E FY2013E

13.3 9.4 2.3 1.3 1.7 7.1 1.6 77.6 77.6 109.3 13.5 453.3 18.2 68.6 1.0 12.9 5.5 0.0 13.1 18.5 19.3 18.4 1.0 46 19 102 9 0.0 0.1 9.5

11.8 8.5 2.0 1.5 1.4 6.1 1.3 87.0 87.0 121.1 15.2 525.1 18.2 68.6 1.0 13.0 5.5 0.0 13.2 18.5 20.7 17.8 1.1 49 24 106 14 0.0 0.1 9.9

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UltraTech Cement | 1QFY2012 Result Update

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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%)

July 28, 20111