UltraTech Q3 Results: Healthy growth in Bottomline but Margins contracts

UltraTech Q3 results
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Revenue Growth: Revenue rose 8% over the preceding quarter to Rs 12,985 crore from Rs 12,016.8 crore. YoY, the revenue increased by 5.89% from Rs 12,262 crore. Analysts had projected Rs 12,900 crore.

Profits beat estimates: Net profit increased 30% quarter-on-quarter to Rs 1,708 crore from Rs 1,313.5 crore in the three months ended December. The net profit in the same period last year was Rs 1,584 crore, a rise of 7.8%. Analysts had estimated profits to be around Rs Rs 1,405 crore. The sharp rise in QoQ numbers is because the last quarter, the company did not perform well.

Margins drop: Ultratech’s EBITDA margin dropped from 23% to 19% QoQ. On the cost front, pet coke and international coal prices have started softening during this quarter, though the prevailing rates are still at elevated levels YoY. Diesel prices are up 24% YoY, despite the recent reduction in duty/other levies by the Central/State Governments.

Volumes decline: Volumes declined 3% to 23.13 million tonnes. Unseasonal rainfall, sand crisis in a few markets of Uttar Pradesh and in East India and a ban on construction activities in the Delhi–National Capital Region hit volumes. The company however, has been able to maintain a strong growth trajectory, recording a 13.2% growth in its domestic cement sales volumes in the nine months ended December, 2021, despite a marginal de-growth in the reported quarter.

Capacity additions: The company commissioned Line II of the Bara Grinding Unit in Uttar Pradesh, having a cement capacity of 2 mtpa. Line I was earlier commissioned in January 2020 and is already operating at a capacity utilization of more than 80%. This additional capacity will help the company to service the fast-growing cement demand in the Central region of India. 

UltraTech's board has also approved capital expenditure of ₹965 crore towards modernization and expansion of capacity at Birla White from the current 6.5 LTPA to 12.53 LTPA, in a phased manner. With this expansion, during FY22, the company as planned is taking its total cement manufacturing capacity in India to 114.55 mtpa.

UltraTech Q3 Results Review: 

UltraTech has reported a mixed set of numbers with bottomline beating estimates but margins and volumes contracting in Q3. During the quarter, trade sales were impacted more than non-trade sales, as overall cement demand remained subdued. While there was a on-year decline in volumes, they improved marginally on a sequential basis. With the onset of the peak season and rising construction activities, cement demand is expected to revive in Q4FY22, driven by a pick-up in the government-led infrastructure and housing projects. Rural and urban demand is also expected to pick up going forward.

The share price rose by 2% after the results to end the day at Rs 7,870.

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