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Informist, Monday, Oct. 7, 2024

 

By Rajesh Gajra

 

MUMBAI – The growth in sales and profit of UltraTech Cement Ltd. in the September quarter may be among the worst that India's largest cement manufacturer has seen in its long history, with lockdown-hit quarters of 2020-21 (Apr-Mar) being an exception. Lower realisations due to cement price correction, sluggish sales volume, and a drop in operating leverage are seen hitting the company's topline and bottomline in Jul-Sept.

 

Soft demand and pricing challenges continued for companies in the cement sector in Jul-Sept after feeble demand hit their ability to raise prices in Apr-Jun. In the June quarter, the cement major reported a meagre 0.3% on-year rise in consolidated net profit to INR 16.95 billion, and net sales rose just 1.9% on year to INR 180.7 billion. Prior to that, UltraTech Cement's bottom line had risen in strong double digits of 35-69% for three consecutive quarters.

 

In Jul-Sept, UltraTech Cement's consolidated net profit is seen at INR 9.5 billion, down 26% on year and 44% on quarter, according to an average of estimates by six brokerages. Consolidated net sales of the company, which is a pivotal member of the Aditya Birla Group, is estimated to fall 4.4% on year and 15.3% on quarter to INR 153.06 billion. The earnings before interest, taxes, depreciation, and amortisation are seen ranging between INR 20.94 billion and INR 23.87 billion.

 

If the Jul-Sept net profit of the company actually falls 26% YoY as estimated, it would be the worst in the past six quarters, according to data from Informist Credit Standard. The revenue is estimated to shrink 3.6% on year, a first in at least 17 quarters, data from the past 20 quarters show. UltraTech Cement's revenue did not decline even in FY21, which was marked by production hits due to lockdowns. The worst quarter in that fiscal was the December quarter when revenue went up by only 5.9% on year.

 

UltraTech Cement's sales volume is likely to have gone up by 3% on year in Jul-Sept, but revenue would have declined 4%, according to brokerage firm Axis Securities' preview report. A decline in cement prices in September would have led to realisation per tonne falling by 7% on year to INR 5,594, it said. Brokerage firm Prabhudas Lilladher expects the company's Jul-Sept volume to have gone up by 7-8% on year but sees net sales to have declined by 0.7%.

 

The EBITDA margin of UltraTech Cement is seen contracting to 15.2% in the quarter ended September from 15.9% in the same quarter a year ago, according to Axis Securities. The EBITDA per tonne is likely to have fallen 11% on year due to subdued operating performance, the brokerage house said. Brokerage house Prabhudas Lilladher also expects UltraTech Cement's EBITDA per tonne to have fallen, but by a lower 9%.

 

The company will likely report a net profit of INR 10.34 billion, down by a steep 19% on year, "owing to lower revenue and negative operating leverage," Axis Securities said. In its preview report, Elara Securities (India) expects UltraTech Cement's net profit to have fallen by a huge 31% on year to INR 8.83 billion.

 

The company will detail its earnings on Oct 21. Post earnings, analysts will focus on management commentary on cement demand and pricing trajectory in the second half of the current financial year.

 

On Monday, shares of UltraTech Cement closed 1.9% lower at INR 11,230.35 on the National Stock Exchange.

 

Following are the Jul-Sept consolidated earnings estimates of UltraTech Cement based on reports compiled by Informist from six brokerage houses:

 

Brokerage firm	Net sales	Net profit	EBITDA
	---------(In INR million)---------
Antique Stock Broking Ltd	152,659	8,899	21,293
Axis Securities Ltd	153,730	10,340	23,420
Centrum Broking Ltd	146,223	8,495	20,940
Elara Securities (India) Pvt Ltd	154,033	8,827	21,288
Motilal Oswal Financial Services Ltd	156,301	9,328	21,722
Nuvama Wealth Management Ltd	155,425	11,032	23,873

 

End

 

Edited by Deepshikha Bhardwaj

 

 

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