International Business

Supply woes

has risen from 39 mw in FY05 to 119.5 mw in FY09, is expected to rise by 93 mw by March 2010 and by another 50 mw by September 2010. This should enable the company to sell surplus power at higher rates in the market—an activity started since August 2008. Adjusted for the Rs 1,300 crore of cash and investments it had as on March 2009, it is virtually debt-free generating operating profit of over Rs 1,300 crore annually. Overall, given its presence in northern region, it should be among the least impacted. The stock is on the buy list of most analysts. MARGINS UNDER PRESSURE in Rs crore 2007-08 2008-09 June 2009 quarter Latest EBIDTA Net Sales EBIDTA (%) PAT Net Sales EBIDTA (%) PAT Net Sales EBIDTA (%) PAT D-E (x) ROCE (%) (Rs) Mkt Cap PE (x) FY10E (%) FY11E (%) ACC # 6,941 27.8 1,427 7,588 21.9 1,100 2,188 35.0 471 0.09 36.0 773 14,518 9.8 27.0 24.0 Ambuja Cem. # 5,685 35.8 1,846 6,209 28.4 1,390 1,847 28.2 325 0.06 30.8 98 14,994 13.0 28.3 29.0 Birla Corp 1,721 33.3 393 1,790 23.7 324 498 36.7 155 0.24 32.4 291 2,240 5.8 29.2 26.0 Grasim Inds 17,056 29.1 2,891 18,475 23.4 2,187 5,080 32.0 1,080 0.37 19.8 2,650 24,293 14.6 26.5 23.4 India Cements 3,045 33.6 642 3,428 24.6 422 953 30.7 144 0.68 18.0 125 3,539 7.7 27.3 24.6 Madras Cement 2,011 37.4 408 2,531 30.8 364 768 37.8 138 1.85 20.9 112 2,666 6.9 33.3 29.7 Shree Cement 2,108 39.1 260 2,716 34.0 578 922 45.7 291 1.50 34.0 1,533 5,341 7.0 41.6 37.6 UltraTech Cem. 5,627 30.8 1,010 6,566 26.2 978 1,953 37.5 418 0.62 29.2 738 9,192 8.1 29.0 25.3 # For ACC and Ambuja Cement, the year ending is December; for Grasim, the numbers are consolidated; Debt-Equity and RoCE ratios for all companies is as per latest audited figures available Source: CapitaLine Plus, Analyst reports UltraTech Cement A subsidiary of Grasim, UltraTech Cement has 11 plants spread across east, west and south India. About 60 per cent of its 23.1 mtpa capacity (3.7 mtpa commissioned in FY09 and 1.2 mtpa in June 2009 quarter) is located in eastern and western states. Notably, UltraTech has also augmented its power generation capacity to 236 mw (added 192 mw in FY09), which meets 80 per cent of its power requirements. The lower coal prices thus, should help reduce power costs. In the cement business, since it is among the early birds to commission capacities, analysts expect UltraTech to gain from incremental volume growth in the coming months. While volumes in June 2009 quarter were up 24 per cent, they have continued to grow robustly thereafter helped by higher capacities. However, the new capacities in the sector, which are at various stages of commissioning, will inevitably result in a surplus scenario from H2FY10, resulting in pressure on margins, believes the company. Overall, analysts expect UltraTech to do relatively better due to early commissioning of capacities, larger contribution from east and west markets and improving cost efficiencies besides, relatively inexpensive valuations. Most of them are positive on the stock. With inputs from Jitendra Kumar Gupta

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