Pickup in Demand, Low Input Costs Help UltraTech Shine
in reducing fuel cost. In the March quarter, the company’s power and fuel expenses fell 14.2% YoY to ₹ 1,016 crore. But the benefit of lower fuel expenses seem to be nullified by freight costs, which grew 12% to ₹ 1,636 crore. Due to this, operating margins (EBITDA margins) remained at 22%. It would take over a year for UltraTechtoseekapprovalfromregulator for its acquisition of cement assets of JP Associates. For FY17, cement demand is expected to grow in the range of 7-8%. UltraTech, with its enhanced capacity and net debt to equity of 0.2, is expected to benefit. Considering FY18E ear nings, UltraTech’s enterprise value is 12x EBITDA, which is lower than its three-year EV/EBITDA of 19.1.