2QFY12 Result Update | Cement

October 20, 2011

UltraTech Cement
Performance highlights
Y/E March (` 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 30,610 0.4 1188/890 12,913 10 16,937 5,092 ULTC.BO UTCEM@IN
4,365 1,227 27.9 683 (10.4) (46.8) (1,147)bp (59.2) 3,215 438 13.5 116 21.6 49.1 290bp 140.9

`1,117 -

2QFY2012 1QFY2012 % chg qoq 2QFY2011 % chg yoy

3,910 652 16.4 279

During 2QFY2012, UltraTech Cement (ULTC) posted 140.9% yoy growth in its bottom line to `279cr on a low base. Bottom-line growth was largely on account of substantial 19.2% yoy growth (down 5% sequentially) in realization, even as domestic dispatches rose by nominal 2.3% (yoy) to 9.16mn tonnes, impacted by slowdown in demand from the housing and infrastructure sectors and the ongoing Telangana agitation in Andhra Pradesh, where the company has a significant presence. We remain Neutral on the stock. OPM up by 290bp yoy, but down by whopping 1,147bp qoq: During 2QFY2012, UltraTechs net sales grew by 21.6% yoy to `3,910cr, primarily on account of higher realization. The companys blended realization improved by 19.2% yoy to `4,125/tonne (down 5% qoq). Although, the company faced margin pressures during the quarter due to higher raw-material, power and freight costs, OPM grew by 290bp yoy to 16.4% on account of higher realization. However, on a sequential basis, the companys margin declined by whopping 1,147bp due to lower realization and higher costs. Outlook and valuation: We expect ULTC to post a 21.2% CAGR in its top line over FY2011-13, aided by higher volumes (also FY2011 financials included only nine months of Samruddhis operations) and better realizations. At current levels, the stock is trading at EV/EBITDA of 7x and EV/tonne of US$130 on FY2013 estimates, which we believe is fair. Hence, we maintain our Neutral recommendation on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.4 11.5 17.9 7.3

Abs. (%) Sensex UltraTech

3m 13.2

1yr 9.6

3yr 0.1

(8.5) (13.0) (14.8)

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 12.7 3.0 26.6 24.4 2.0

FY2011
13,210 87.4 1,404 28.4 20.5 51.2 21.8 2.9 18.4 16.5 2.4

FY2012E
17,385 31.6 1,848 31.6 21.2 67.4 16.6 2.5 16.2 16.1 1.7

FY2013E
19,411 11.7 2,108 14.1 21.2 76.9 14.5 2.2 16.1 16.7 1.5

V Srinivasan
+91 22 39357800 Ext: 6831 v.srinivasan@angelbroking.com

128
22 7.0

141
49 11.6

136
49 8.2

130
49 7.0

Sourabh Taparia
+91 22 39357800 Ext: 6815 sourabh.taparia@angelbroking.com

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

Please refer to important disclosures at the end of this report

UltraTech Cement | 2QFY12 Result Update

Exhibit 1: 2QFY2012 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 (`) 2QFY2012
3,910 71 3,981 667 17.1 955 24.4 206 5.3 748 19.1 753 19.2 3,328 652 16.4 67 223 33 395 116 29.4 279 7.1 10.2

1QFY2012
4,365 39 4,404 504 11.5 1,037 23.7 184 4.7 769 19.7 684 17.5 3,177 1,227 27.9 73 223 27 958 275 28.7 683 15.6 24.9

% chg (qoq)
(10.4) 81.6 (9.6) 32.4 (7.9) 11.8 (2.8) 10.1 4.7 (46.8) (1,147)bp (7.5) (0.1) 21.5 (58.8) (57.8) (59.2) (59.2)

2QFY2011
3,215 30 3,245 464 14.4 843 26.2 191 4.9 650 16.6 657 16.8 2,807 438 13.5 85 218 39 173 58 33.2 116 3.6 4.2

% chg (yoy)
21.6 137.8 22.7 43.6 13.2 7.7 15.0 14.5 18.6 49.1 290bp (20.5) 2.0 (15.7) 128.0 102.1 140.9 140.9

1HFY12
8,275 110 8,385 1,171 14.1 1,996 24.1 390 4.7 1,517 18.3 1,432 17.3 6,505 1,880 22.4 140 446 59 1,353 391 28.9 962 11.6 35

1HFY11
7,205 63 7,268 979 13.6 1,735 24.1 360 5.0 1,413 19.6 1,310 18.2 5,797 1,471 20.2 163 432 91 967 293 30.3 674 9.3 24

% chg
14.9 73.8 15.4 19.6 15.0 8.4 7.3 9.3 12.2 27.8 218bp (14.4) 3.3 (34.7) 40.0 33.4 42.8 42.8

Source: Company, Angel Research; Note 1HFY2011 numbers are restated

Exhibit 2: Financial performance

4,800 4,000 3,200
(` cr)

4,556 4,023 3,245 3,741

4,404 3,981

30 27 24 21 18
(%)

2,400 1,600 800 0 1QFY11 2QFY11 3QFY11 4QFY11 1QFY12 2QFY12

OPM (RHS) Net operating income Net Profit

558 116

727 319

683 279

15 12

Source: Company, Angel Research

October 20, 2011

UltraTech Cement | 2QFY12 Result Update

Exhibit 3: 2QFY2012 Actual vs. Angel estimates

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

Actual
3,909 653 16.7 279

Estimates
4,216 931 22.1 445

Variation (%)
(7.3) (29.9) (540)bp (37.4)

Performance highlights
Net sales up 21.6% yoy, aided by higher realization
During 2QFY2012, ULTCs net sales rose by 21.6% yoy on account of higher blended realization. Realization improved by 19.2% yoy to `4,125/tonne on a low base. Cement prices plunged to very low levels in 2QFY2011, leading to abysmally low realizations for cement players during the quarter. However, prices recovered substantially from those levels in the subsequent quarters and touched all-time high levels in March 2011 due to the production discipline adopted by cement manufacturers. Prices remained at high levels until May 2011 and started to decline since then. Thus, though ULTCs realization is high on a yoy basis, it declined by 5% on a sequential basis during 2QFY2012. The companys domestic dispatches stood at 9.16mn tonnes, up 2.3% yoy. Combined domestic cement and clinker sales stood at 8.94mn tonnes. White cement and wall care putty sales stood at 0.219mn tonnes.

Spike in input costs keeps margins under pressure

The company faced margin pressure during the quarter on account of increased raw-material, power and fuel, and freight costs. Despite cost pressures, OPM for the quarter was higher by 290bp yoy and stood at 16.4% on account of better realization.

Per tonne analysis

The companys blended realization per tonne rose by 19.2% yoy to `4,125. Raw-material cost per tonne rose by 15.2% yoy and 8.1% qoq, respectively. Power and fuel cost per tonne rose by 10.0% yoy on account of increased coal prices both domestically and internationally. Domestic fuel costs were higher on a yoy basis due to the price hike by Coal India during February 2011. During 2QFY2012, global coal prices were also higher by ~25% on a yoy basis. Freight cost/per tonne rose by 12.7% yoy and 3.2% qoq. The companys operating profit/tonne increased by 39.8% yoy to `614.

October 20, 2011

UltraTech Cement | 2QFY12 Result Update

Exhibit 4: Operational 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

2QFY12
4125 645 1049 789 794 614

1QFY12
4342 596 1047 765 680 1182

2QFY11
3460 560 953 700 708 439

%chg yoy
19.2 15.2 10.0 12.7 12.2 39.8

% chg qoq
(5.0) 8.1 0.1 3.2 16.8 (48.1)

October 20, 2011

UltraTech Cement | 2QFY12 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 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 Samruddhis merger along with being insulated from the wide variations in regional demand and price volatility. Post the merger, ULTC has been enjoying 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 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 ULTC to post a 21.2% CAGR in its top line over FY2011-13, aided by higher volumes (also FY2011 financials included only nine months of Samruddhis operations). At current levels, the stock is trading at EV/EBITDA of 7x and EV/tonne of US$130 on FY2013 estimates, which we believe is fair. Hence, we maintain our Neutral recommendation on the stock.

Exhibit 5: Change in estimates

FY2012 Earlier Net sales Operating exp. Operating profit Depreciation PBT Tax PAT
Source: Angel Research

FY2013 Var. (%) 0.4 2.2 (6.0) 0.0 (4.8) (4.8) (4.8) Earlier 19,726 15,506 4,435 976 3,191 957 2,234 Revised 19,411 15,499 4,124 976 3,012 904 2,108 Var. (%)
(1.6) 0.0 (7.0) 0.0 (5.6) (5.6) (5.6)

Revised 17,385 13,891 3,683 909 2,640 792 1,848

17,317 13,587 3,919 909 2,772 832 1,941

October 20, 2011

UltraTech Cement | 2QFY12 Result Update

Exhibit 6: One-year forward EV/tonne

EV $70 $90 $110 $130

350,000 300,000 250,000

(` mn)

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 7: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Madras Cement UltraTech Reco. Neutral Neutral Neutral Buy Neutral Neutral CMP (`)
1,115 154 75 42 100 1,117

Tgt. price (`)

54 -

Upside (%)
30.4 -

FY2013E P/BV (x)

2.6 2.6 0.6 0.4 1.1 2.2

FY2013E P/E (x)

15.1 16.3 7.5 5.2 8.1 14.5

FY2011-13E EPS CAGR (%)

11.3 7.2 111.2 28.6 18.4 22.5

FY2013E RoCE (%)

22.6 21.6 6.6 7.8 10.2 16.7

FY2013E RoE (%)

18.0 16.8 8.3 8.4 13.9 16.1

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

October 20, 2011

UltraTech Cement | 2QFY12 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 3,789 510 1,253 172 1,854 1,782 25.7 32 237 1,545 29.6 28.0 76 37 2 1,507 32.5 1,507 499 33 1,007 33.8 18.3 81 81 6,383 61 6,444 15.7 4,679 607 1,727 218 2,127 1,765 (1.0) 28 323 1,442 (6.7) 22.6 126 45 3 1,362 (9.6) 1,362 384 28 977 (3.0) 15.3 78 78 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 1,588 495 31 1,093 11.9 15.5 88 88 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 21 1,404 28.4 10.6 51 51 17,385 190 17,575 31.4 13,891 2,341 4,256 796 6,498 3,683 36.1 21.2 909 2,774 42.9 16.0 273 139 5 2,640 47.8 2,640 792 30 1,848 31.6 10.6 67 67 19,411 212 19,624 11.7 15,499 2,628 4,732 876 7,262 4,124 12.0 21.2 976 3,148 13.5 16.2 277 141 5 3,012 14.1 3,012 904 30 2,108 14.1 10.9 77 77

33.8

(3.0)

11.9

(41.7)

31.6

14.1

October 20, 2011

UltraTech Cement | 2QFY12 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 17,942 6,542 11,401 1,105 3,730 3,757 145 1,054 2,559 3,454 304 16,541 19,142 7,451 11,691 1,905 3,730 4,727 310 1,135 3,282 4,238 490 17,816 20,542 8,427 12,115 3,505 3,730 5,299 284 1,269 3,746 4,733 566 19,917 124 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 11,918 12,192 3,895 1,730 17,816 274 13,658 13,932 4,255 1,730 19,917

FY2008 FY2009 FY2010 FY2011

FY2012E

FY2013E

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UltraTech Cement | 2QFY12 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 FY2008 FY2009 FY2010
1,507 237 120 76 37 480 1,422 (1,774) 313 37 (1,424) 162 73 76 13 11 90 101 1,362 323 (113) 126 45 210 1,442 (823) (864) 45 (1,641) 401 73 126 203 4 101 104 1,588 388 (90) 118 56 389 1,559 (259) (635) 56 (838) (537) 87 118 (742) (21) 104 84

FY2011 FY2012E FY2013E

1,786 766 (93) 277 122 519 2,095 (1,223) (542) 122 (1,642) 1 (1) 141 252 (392) 61 84 145 2,640 909 (19) 273 139 792 2,873 (2,000) 139 (1,861) (250) 322 273 (845) 166 145 310 3,012 976 (103) 277 141 904 3,118 (3,000) 141 (2,859) 360 368 277 (285) (26) 310 284

October 20, 2011

UltraTech Cement | 2QFY12 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 7.0 (0.0) (0.0) 10.1 0.0 0.1 11.4 1.1 34 13 98 1 1.0 37 12 99 (2) 0.9 39 11 92 3 1.0 38 11 81 3 0.9 46 14 101 4 1.0 50 16 106 4 34.8 54.1 45.2 25.2 34.8 31.0 24.4 26.6 26.6 16.5 17.7 18.4 16.1 18.0 16.2 16.7 19.8 16.1 27.7 66.9 1.3 23.8 3.0 0.7 39.2 22.4 71.8 1.1 18.4 4.6 0.6 26.9 23.2 68.8 1.1 17.0 4.3 0.5 22.9 14.5 78.6 1.1 13.1 7.6 0.4 15.1 15.8 70.0 1.0 11.5 4.8 0.4 13.8 16.0 70.0 1.1 11.9 4.8 0.3 14.1 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 5.1 389.2 67.4 67.4 100.6 11.8 444.9 76.9 76.9 112.5 13.4 508.4 13.8 11.2 5.2 0.5 2.5 7.7 2.7 14.2 10.7 3.9 0.5 2.3 8.5 2.3 12.7 9.4 3.0 0.6 2.0 7.0 2.0 21.8 14.1 2.9 0.5 2.4 11.6 1.9 16.6 11.1 2.5 1.1 1.7 8.2 1.7 14.5 9.9 2.2 1.2 1.5 7.0 1.5

FY2008 FY2009 FY2010

FY2011 FY2012E FY2013E

October 20, 2011

10

UltraTech Cement | 2QFY12 Result Update

Research Team Tel: 022 - 39357800

E-mail: research@angelbroking.com

Website: www.angelbroking.com

DISCLAIMER
This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine the merits and risks of such an investment. Angel Broking Limited, its affiliates, directors, its proprietary trading and investment businesses may, from time to time, make investment decisions that are inconsistent with or contradictory to the recommendations expressed herein. The views contained in this document are those of the analyst, and the company may or may not subscribe to all the views expressed within. Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's fundamentals. The information in this document has been printed on the basis of publicly available information, internal data and other reliable sources believed to be true, but we do not represent that it is accurate or complete and it should not be relied on as such, as this document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot testify, nor make any representation or warranty, express or implied, to the accuracy, contents or data contained within this document. While Angel Broking Limited endeavours to update on a reasonable basis the information discussed in this material, there may be regulatory, compliance, or other reasons that prevent us from doing so. This document is being supplied to you solely for your information, and its contents, information or data may not be reproduced, redistributed or passed on, directly or indirectly. Angel Broking Limited and its affiliates may seek to provide or have engaged in providing corporate finance, investment banking or other advisory services in a merger or specific transaction to the companies referred to in this report, as on the date of this report or in the past. Neither Angel Broking Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from or in connection with the use of this information. Note: Please refer to the important `Stock Holding Disclosure' report on the Angel website (Research Section). Also, please refer to the latest update on respective stocks for the disclosure status in respect of those stocks. Angel Broking Limited and its affiliates may have investment positions in the stocks recommended in this report.

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%)

October 20, 2011

11