Morgan Stanley rates UltraTech Cement rated ‘Overweight’

UltraTech Cement has been rated ‘Overweight’ by Morgan Stanley with the EBITDA beat driven by costs, the research house notes.

Morgan Stanley cited gradual improvement in industry cement demand, UltraTech Cements's positioning with timely capacity additions and its pan-India presence. Cost focus should further aid growth, it highlighted. "We believe current multiples are sustainable, as we project 25 per cent EBITDA CAGR over FY17-19. UltraTech reported a seven per cent YoY decline in FY174Q standalone EBITDA, to INR12.8bn, ahead of consensus and our estimate. The key positive surprise was lower-than expected cost and marginally better-than-expected blended realisation. However, this was partly offset by a marginal miss on volumes," Morgan Stanley said.

Well positioned for the 'looming up-cycle'
Profit after tax of INR6.8bn fell 12 per cent YoY but was helped by other income was ahead of Morgan Stanley's estimate. The company recommended a final dividend of 10 per share for FY17. "The results support our view that with its pan-India presence, cost focus and a strong brand, the company is well positioned in the looming up-cycle," Morgan Stanley noted.

Moreover, an improvement in the pricing environment and costs remaining benign in the near-term should further support earnings momentum, according to the note. (Source, Financial Express, India)