4QFY2012 Result Update | Cement

April 24, 2012

UltraTech
Performance Highlights
Y/E March (` cr) Net sales Operating profit OPM (%) Net profit 4QFY2012
5,337 1,319 24.5 867

NEUTRAL
CMP Target Price
% Chg qoq
16.8 35.3 318bp 40.7

`1,414 -

3QFY2012
4,568 975 21.3 616

4QFY2011
4,490 1,087 23.9 727

% Chg yoy
18.9 21.4 61bp 19.3

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 38,762 0.6 1542/916 11,303 10 17,207 5,223 ULTC.BO UTCEM@IN

Source: Company, Angel Research

During 4QFY2012, UltraTech Cement (ULTC) posted strong 19.3% yoy growth in its bottom line on account of substantial 10.0% yoy growth (up 2.5% sequentially) in blended realization. Volumes (incl. clinker and white cement) rose by 8.1% yoy to 11.81mn tonnes. The companys results were well ahead of ours as well as streets estimates, primarily on account of a 1% qoq decline in its per tonne operating costs (`3,448/tonne). Per tonne freight costs rose only by 1.6% qoq, despite the substantial increase in railway freight charges (base freight charges increased by 22% w.e.f. March 6, 2012). Similarly power and fuel costs per tonne declined by 6.6% on a qoq basis, even though coal costs were down only marginally during the quarter. We remain Neutral on the stock. OPM up by 318bp yoy: During 4QFY2012, ULTCs net sales grew by 18.9% yoy to `5,337cr, on account of 10% yoy growth in volumes and 8% yoy growth in realization. The companys blended realization improved by 10% yoy to `4,519/tonne. Strong improvement in realization offset the 8.6% yoy growth in per tonne operating costs due to which OPM rose by 318bp yoy to 24.5%. Outlook and valuation: We expect ULTC to post an 11.2% and 8.3% CAGR in its top line and bottom line over FY2012-14, respectively. At current levels, the stock is trading at EV/tonne of US$124 on FY2013 estimates, which we believe is fair. Further, ongoing investigation by Competition Commission of India regarding cartelization by cement companies and its potential negative outcome are overhangs on the stock. We continue to remain Neutral on the stock.

Shareholding Pattern (%) Promoters MF / Banks / Indian Fls FII / NRIs / OCBs Indian Public / Others 63.3 5.5 19.1 12.2

Abs. (%) Sensex UTCEM

3m 1.2 16.1

1yr (12.2)

3yr 51.9

39.6 149.6

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

FY2011
13,210 87.4 1,404 28.4 20.5 51.2 27.6 3.6 18.4 17.8 2.8 159

FY2012
18,166 37.5 2,446 74.2 22.8 89.3 15.8 3.0 20.8 19.6 2.0 140

FY2013E
19,938 9.8 2,456 0.4 21.7 89.6 15.8 2.6 17.7 16.9 1.8 139

FY2014E
22,460 12.6 2,870 16.9 22.9 104.7 13.5 2.2 17.9 17.6 1.7 124

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

Sourabh Taparia
022-39357800 Ext 6815 sourabh.taparia@angelbroking.com

13.8

8.5

8.2

7.4

Please refer to important disclosures at the end of this report

UltraTech Cement | 4QFY2012 Result Update

Exhibit 1: 4QFY2012 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

4QFY2012
5,337 55 5,392 769 14.4 1,190 22.3 220 4.1 1,089 20.4 805 15.1 4,073 1,319 24.5 59 233 145 1,172 1,172 305 26.0 867 16.3 31.7

3QFY2012
4,568 11 4,579 631 13.8 1,118 24.5 223 4.2 940 17.6 692 13.0 3,604 975 21.3 28 224 144 867 867 250 28.9 616 13.5 22.5

% Chg qoq
16.8 421.6 17.8 21.8 6.5 (1.4) 15.8 16.4 13.0 35.3 318bp 108.3 4.3 0.9 35.3 35.3 21.8 40.7 40.7

4QFY2011
4,490 66 4,556 632 14.1 966 21.5 217 4.1 821 15.4 834 15.6 3,469 1,087 23.9 83 227 44 821 821 94 11.5 727 16.2 26.5

% Chg yoy
18.9 (16.4) 18.3 21.6 23.3 1.2 32.7 (3.5) 17.4 21.4 61bp (29.4) 2.9 232.3 42.8 224.5 19.3 19.3

FY2012
18,166 147 18,313 2,576 14.2 4,304 23.7 831 15.6 3,312 62.1 3,142 58.9 14,166 4,147 22.6 224 903 372 3,393 3,393 947 27.9 2,446 13.5 89.3

FY2011
13,210 141 13,351 1,866 14.1 3,123 23.6 667 12.5 2,558 47.9 2,455 46.0 10,668 2,683 20.1 277 766 146 1,786 1,786 382 21.4 1,404 10.6 51.2

% Chg
37.5 4.1 37.2 38.1 37.8 24.7 29.5 28.0 32.8 54.6 255bp (19.2) 17.9 155.2 90.0 90.0 147.8 74.2

Exhibit 2: Financial performance

(` cr) 6,400 5,600 4,800 4,000 3,200 2,400 1,600 800 0 3QFY11 4QFY11 1QFY12 2QFY12 Net Profit 3QFY12 4QFY12 Net operating income
Source: Company, Angel Research

(%) 30 5,392 4,556 3,741 4,404 4,651 3,981 27 24 21 18 319 727 683 279 617 867 15 12 OPM (RHS)

April 24, 2012

UltraTech Cement | 4QFY2012 Result Update

Exhibit 3: 4QFY2012 Actual vs. Angel Estimates

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

Actual 5,337 1,319 867

Estimates 5,176 1,026 551

Variation (%) 3.1 28.6 57.3

Performance highlights
Net sales up 16.8% yoy, aided by higher volume realizations
During 4QFY2012, ULTCs net sales rose by 18.9% yoy on account of higher volumes and better realization. During the quarter, realization improved by 10.0% yoy to `4,519/tonne. The companys volumes (incl. clinker and white cement) stood at 11.8mn tonnes, up 8% yoy, in 4QFY2012. ULTCs volume growth was lower than all-India dispatches growth of 9.5% for 4QFY2012. Strong improvement in all-India dispatches was on account of pick-up in cement demand all across the country (including the southern region, which has remained a laggard over the past several quarters). UltraTech, a pan-India player with a substantial presence in the southern region, benefitted from the pick-up in demand in the region. During the quarter, realization was also higher by 10% yoy and 2.5% qoq, respectively. Cement manufacturers had resorted to price increases during the quarter to capitalize on demand pick-up and due to the hike in freight rates carried out by the railways and increase in excise duty announced in the Union Budget.

Strong realization results in OPM expansion, despite cost pressures

During the quarter, while the cost of domestic coal was higher on a yoy basis due to price hike carried out by Coal India in February 2011, imported coal costs were marginally lower by 2.2% yoy (1.8% qoq).

Per tonne analysis

During 4QFY2012, ULTCs blended realization per tonne rose by 10.0% yoy to `4,519. Raw-material cost per tonne increased by 13.7% yoy. P&F cost per tonne rose by 14.1% yoy on account of increased coal prices. Freight cost/per tonne rose by 22.8% yoy. The companys operating profit/tonne increased by 14.6% yoy to `1,070 during the quarter.

April 24, 2012

UltraTech Cement | 4QFY2012 Result Update

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
Source: Company, Angel Research

4QFY2012 3QFY2012 4QFY2011 chg (%) yoy chg (%) qoq

4,519 553 1,008 922 682 3,448 1,070 4,410 567 1,079 908 668 3,479 931 4,108 486 883 751 763 3,174 934 10.0 13.7 14.1 22.8 (10.7) 8.6 14.6 2.5 (2.5) (6.6) 1.6 2.1 (0.9) 15.0

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 clinkerization plant and a 2.1mtpa grinding capacity in 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 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. 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 an 11.2% and 8.3% CAGR in its top line and bottom line over FY2012-14. At current levels, the stock is trading at EV/tonne of US$124 on FY2013 estimates, which we believe is fair. Further, ongoing investigation by Competition Commission of India regarding cartelization by cement companies and its potential negative outcome are overhangs on the stock. We continue to remain Neutral on the stock.

April 24, 2012

UltraTech Cement | 4QFY2012 Result Update

Exhibit 5: Change in estimates

(` cr) Earlier Net sales Operating exp. Operating profit Depreciation PBT Tax PAT
Source: Angel Research 19,889 15,878 4,238 919 3,213 964 2,249

FY2013E Revised
19,938 15,778 4,322 971 3,407 951 2,456

FY2014E Var. (%)

0.2 (0.6) 2.0 5.7 6.0 (1.4) 9.2

Earlier
22,399 17,623 5,032 1,052 3,817 1,145 2,672

Revised
22,460 17,507 5,135 1,131 3,981 1,111 2,870

Var. (%)
0.3 (0.7) 2.0 7.4 4.3 (3.0) 7.4

Exhibit 6: One-year forward EV/Tonne

350,000 300,000 250,000 EV/tonne $80 $100 $120 $140

EV(` mn)

200,000 150,000 100,000 50,000 0

Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

May-06

May-07

May-08

May-09

May-10

May-11

Sep-11

Source: BSE, Company, Angel Research

Exhibit 7: Recommendation summary

Company ACC* Ambuja Cements* India Cements JK Lakshmi Madras Cement Shree Cements UltraTech Cements Reco CMP (`) Tgt. Price (`) Upside (%) FY2013E P/BV (x) FY2013E P/E (x) FY2011-13E EPS CAGR FY2013E RoCE (%) FY2013E RoE (%)

Neutral Neutral Neutral Buy Neutral Neutral Neutral

1,217 152 91 66 147 2,760 1,414

79 -

Jan-06

21 -

Jan-07

2.7 2.6 0.7 0.5 1.3 3.1 2.2

Jan-08

15.0 14.4 7.2 4.0 8.2 15.2 13.5

Jan-09

7.3 13.7 14.1 21.5 4.7 65.4 8.3

Jan-10

23.3 22.2 8.6 11.1 14.4 19.7 17.6

Jan-11

19.0 19.4 10.5 14.3 16.9 22.2 17.9

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

April 24, 2012

Jan-12

UltraTech Cement | 4QFY2012 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& Amortization 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) Adjusted PAT % chg (% of Net Sales) Basic EPS (`) Fully Diluted EPS (`) % chg FY2009 FY2010 FY2011
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) 1,362 384.4 28 977 977 (3.0) 15.3 78 78 (3.0) 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 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 FY2013E FY2014E

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 19,938 161 20,099 9.8 15,778 2,804 4,759 914 7,300 4,322 4.2 21.7 971 3,351 3.3 16.8 295 351 10 3,407 0.4 3,407 950.5 28 2,456 2,456 0.4 12.3 90 90 0.4 22,460 181 22,642 12.6 17,507 2,955 5,275 1,006 8,272 5,135 18.8 22.9 1,131 4,004 19.5 17.8 335 312 8 3,981 16.9 3,981 1,110.7 28 2,870 2,870 16.9 12.8 105 105 16.9

April 24, 2012

UltraTech Cement | 4QFY2012 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 Misc. exp. not written off Total Assets
1,035 1,372 104 382 886 1,253 119 6,467 1,670 1,472 84 351 1,038 1,299 173 7,044 4,292 3,619 145 904 2,570 5,169 (1,550) 14,825 5,251 4,161 188 1,164 2,809 4,573 (412) 18,370 3,251 4,682 135 1,347 3,200 4,735 (53) 21,258 4,251 5,311 213 1,532 3,565 5,304 7 24,188 7,401 2,765 4,636 677 8,078 3,136 4,942 259 17,519 6,542 10,978 1,105 17,570 7,445 10,126 3,405 20,070 8,415 11,655 6,405 26,070 9,546 16,524 3,405 124 3,478 3,602 2,142 723 6,467 124 4,484 4,609 1,605 831 7,044 274 10,392 10,666 2,429 1,730 14,825 274 12,586 12,860 3,772 1,738 18,370 274 14,614 14,888 4,632 1,738 21,258 274 16,984 17,258 5,192 1,738 24,188

FY2009

FY2010

FY2011

FY2012

FY2013E FY2014E

April 24, 2012

UltraTech Cement | 4QFY2012 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.)/ Dec. in 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 FY2009 FY2010 FY2011
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 1,786 766 (93) 277 122 519 2,095 (1,223) (542) 122 (1,642) 1 (1) 141 252 (392) 61 84 145

FY2012 FY2013E FY2014E

3,393 903 (911) 224 372 947 2,289 (2,351) (959) 372 (2,939) 0 1,343 426 224 693 44 145 188 3,407 971 (412) 295 351 951 2,959 (5,500) 2,000 351 (3,149) 860 428 295 137 (53) 188 135 3,981 1,131 18 335 312 1,111 4,042 (3,000) (1,000) 312 (3,688) 560 500 335 (275) 78 135 213

April 24, 2012

UltraTech Cement | 4QFY2012 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.) FY2009 FY2010 FY2011 FY2012 FY2013E FY2014E

18.0 13.5 4.9 0.4 2.9 10.6 2.9 78.5 78.5 104.4 5.8 289.3 22.4 71.8 1.1 18.4 4.6 0.6 26.9 25.2 34.8 31.0 1.0 37 12 99 (2) 0.3 0.6 11.5

16.1 11.9 3.8 0.5 2.6 8.8 2.6 87.8 87.8 119.0 7.0 370.2 23.2 68.8 1.1 17.0 4.3 0.5 22.9 24.4 26.6 26.6 0.9 39 11 92 3 (0.0) (0.1) 14.0

27.6 17.9 3.6 0.4 2.8 13.8 2.5 51.2 51.2 79.2 5.1 389.2 14.5 78.6 1.2 14.1 10.8 0.3 15.0 17.8 19.1 18.4 1.0 38 11 111 (22) (0.2) (0.7) 7.0

15.8 11.6 3.0 1.1 2.0 8.5 1.9 89.3 89.3 122.2 15.6 469.2 17.7 72.1 1.1 14.2 5.2 0.3 16.6 19.6 22.9 20.8 1.0 40 14 126 (23) (0.1) (0.4) 14.5

15.8 11.3 2.6 1.1 1.8 8.2 1.7 89.6 89.6 125.0 15.6 543.2 16.7 72.1 1.0 12.3 5.1 0.3 14.5 16.9 22.7 17.7 1.1 40 15 108 (7) 0.1 0.3 11.4

13.5 9.7 2.2 1.3 1.7 7.4 1.6 104.7 104.7 146.0 18.3 629.7 17.7 72.1 1.0 12.8 4.9 0.3 15.2 17.6 22.7 17.9 1.0 40 14 105 (3) 0.0 0.1 12.0

April 24, 2012

UltraTech Cement | 4QFY2012 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%)

April 24, 2012

10