MY BIRTHDAY TODAY: BIDDING ADIEU TO ALL _/\_ !!

Hello Friends!! 

 It’s my Birthday today .. and wishing you all a Very Happy Ram Navami too...
I am very emotional in breaking this news to you all, that after 9 long years of blogging, I am finally bidding adieu to my Blog. I started blogging as fun and later it become blogging for a purpose, for a cause - cause to help. I blogged about stocks, about my views, stories about markets - my intention was purely to educate & provide an advantage to investors, to make every citizen of my country an Investor & not a speculator.. my endeavor was to educate and make investors aware... I gave my views on stocks in every 10 days i.e. on every 3rd, 13th & 23rd of every month, that too for 9 long years, there were times when it became difficult for me to cope up with my blogging, professional and personal time, but somehow I managed it....believe me, this decision is as hard for me as hard it is for you lovely people to hear it.  
   
      Friends, its been 9 long years since I started this blog and it has been an amazing journey ( My First Post ) and as I write this, it is becoming more difficult for me..but I have to do it, all these years you all have showered me with immense love, appreciations and support and I am very much thankful for all. During this journey, I have learned so many valuable lessons, found new truths about myself, made good friends, and also had an opportunity to meet many new people along the way. Stock markets made me humble, interacting with readers made me mature. Some of you who have still been with me since the beginning, & still with me - I am so grateful for that. Markets have taught me a lot and I am still learning, a student for life. But, after 372 published posts with more than 570+ followers, now it is becoming difficult for me to blog, some instances which happened in my personal life made me more determined towards my decision, now there's nothing left and no one for whom I motivate myself to write, I have started feeling that my blogging is not serving its purpose it should be.. those who know me knows this well that I never wrote for fame or for money never - money-making was not my intentions ever. I received blessings, appreciation from you all wonderful readers, THANK YOU guys, Thank you so much, my intentions were pure & clear... I never expected anything from anyone, I always want that my readers get benefited and make wealth for themselves and be a part of India Growth story. I selflessly intended good for all my readers, I never intended to make money from my blog....but nothing inspires me anymore, there's no one for whom I motivate myself to write anymore, I can say that my Karma towards my readers ends here... People close to me know very well that I am not very expressive, I cannot express myself and you all can imagine how difficult it is for me to convey this emotion to you all. This is very shattering for me and is breaking me as well, but I have to DO IT.. I don't know whether I will come back again to blogging or not  - I don't know - I may or I may not, but as of now, Yes it's a sad BYE :(  _/\_

A previous version of the blog

One wise man truly said, Once a Market men always a market men, I am the learner, and markets have given me lots and taught me many lessons. I still have more to learn from markets. Learning is the journey and not the destination, Markets is my Passion & I can never quit markets, I am just stopping my blogging journey here. Guys, I will be available to all on stocks topics and markets on Email - montyuu@yahoo.com, and all the posts & comments will be available online. I am optimistic about markets and I do believe in India Growth Story, the consumption theory, the demographic dividend that our nation enjoys, encash it, please do participate in the growth of our nation by investing in stock markets with proper study and strict stop loss - look at the companies with better Revenue growth - Revenue is the Economic engine that drives a company without which the company cannot earn Profit. Constant revenue growth of at least 10 % or more every year for each of the last 10 years indicates that the company is able to expand its business operation and is growing, (for banks and financial institutions take net loan growth instead of revenue growth); Look at company's Return on Capital Employed (ROCE) This ratio measures the company's profitability and the efficiency with which its capital is employed. Look at companies whose ROCE was at least 15 % for each of the last 10 years (for banks and financial institutions take pre-tax ROE of more than 20 % for each of the last 10 years instead of ROCE). Revenue growth creates shareholder's value via stock price increases, only if ROCE remains high. Hence it is a very important metric in assessing a firm's performance; also look at companies with great net profit margins, less debt - try to have a stock whose debt is not more than 3 times its net profit, companies with greater ROCE, ROE, wonderful consistent cashflows & best management. BE INVESTED GUYS - wonderful days for Indian Equities are yet to come. Lastly, I would like to thank all of you wonderful people, for being there, with me all these years, I take this opportunity to give Thanks to all my reader friends.. TAKE CARE !!   

                                           God Bless You All !!!

Thanks to my parents who made me what I am here today And Thanks God for all of it !!!

Warm Regards,

Bhavikk Shah.  

                                                          

There are many stocks but some of my fav picks:- Adani Ports ; Berger Paints ; MCX ; PVR ; Cera sanitaryware ; CCL Products ; Nilkamal ;  Symphony Ltd ; Union Budget ; HPPL ;  HUL ; Colgate Palmolive ; Ultratech Cement ; AB NUVO ;  BSE LTD ; IPO's

READ HERE ON STOCK MARKET STORIES - CLICK HERE

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ULTRATECH CEMENTS LTD : ACCUMULATE AT EVERY LEVELS !!!

Scrip Code: 532538 / ULTRACEMCO

CMP:  Rs. 1705.70; Accumulate at every levels.
Short Term Target : Rs. 1790; Medium to Long term Target: Rs. 1875; STOP LOSS – Rs. 1569.24; Market Cap: Rs. 46,775.40 Cr; 52 Week High/Low: Rs. 2069.05 / Rs. 1402.35

Total Shares: 27,42,29,957 shares; Promoters : 16,98,87,299 shares –61.95 %; Total Public holding : 10,43,42,658 shares – 38.05 %; Book Value: Rs. 545.54; Face Value: Rs. 10.00; EPS: Rs. 74.12; Dividend: 90.00 % ; P/E: 23.01 times; Ind. P/E: 14.82; EV/EBITDA: 12.12.

Total Debt: 4,462.68 Cr; Enterprise Value: Rs. 52,981.91 Cr.

ULTRATECH CEMENT LIMITED: ULTRACEMCO was incorporated in 2000 and is based in Mumbai, India. It was formerly known as Ultra Tech Cemco Limited and changed its name to ULTRATECH CEMENT Ltd on October 2004. It’s a subsidiary of Grasim Industries Ltd from Aditya Birla Group. The Company is engaged in the business of cement and cement related products. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. UltraTech Cement Limited, together with its subsidiaries, primarily engages in the manufacture and sale of cement in India and internationally. Its products include ready mix concrete; building products, including waterproofing solutions, polymer modified mortar, lightweight autoclaved aerated concrete blocks, thin layer jointing mortar, and ready mix plaster; and white cement. The Company also manufactures ready mix concrete (RMC). UltraTech Cement is an exporter of cement clinker. The Company has an annual capacity of 23.1 million tons. The Company has 11 integrated plants, one white cement plant, one clinkerisation plant in the United Arab Emirates, 15 grinding units - 11 in India, two in the United Arab Emirates, one in Bahrain and Bangladesh each and five terminals - four in India and one in Sri Lanka. In the 2011, its wholly owned subsidiary, UltraTech Cement Middle East Investments Limited (UCMEIL) acquired ETA Star Cement together with its operations in the United Arab Emirates, Bahrain and Bangladesh and acquired management control. On July 1, 2010, Samruddhi Cement Limited (Samruddhi) amalgamated with the Company.  The Company's subsidiaries include Dakshin Cement Limited, UltraTech Cement Lanka (Pvt.) Ltd. and UltraTech Cement Middle East Investments Limited. In India the company has 11 Integrated Plants, 11 Grinding Units, 5 Bulk Terminals, 4 Jetties. It has only 1 bulk terminal at Sri Lanka. In UAE, company has 2 Grinding Units, 1 Clinker production, 1 star cement head office. UltraTech has 1 Grinding unit each at Bahrain and Bangladesh. The company is compared to Ambuja Cements Ltd, ACC Limited, Shree Cement Ltd, Grasim Ind Ltd and Rain Commodities Limited domestically and Globally compared with Holcim of Germany, Ashaka Cement Plc of UAE, Bamburi Cement of UAE, Oman Cement Company of UAE, Kuwait Cement Company of UAE, Qatar National Cement Company of UAE, Asia Cement Corp of China, Chia Hsin Cement Corp of China, Krosaki Harima Corp of Tokyo, Ssangyong Cement Co of Japan, Taiwan Cement Corp of Taiwan, West China Cement of Hong Kong, Lafarge Cement of Germany, Vulcan materials Co of USA, US Concrete Inc of USA, United States lime & Minerals of USA, Grupo Argos S.A of USA, Cemex Latam Holdings S.A of USA .

Investment Rationale:

UltraTech’s inception can be traced back to the mid-1980s with the establishment of Grasim’s first cement plant at Jawad in Madhya Pradesh. In 2001, with the objective of increasing its reach, Grasim acquired a stake in L&T Cement Ltd. The stake was further increased to a majority stake in 2003 thereby giving Grasim a pan-India presence and an increased market share. In 2004, the demerger of L&T’s cement business was completed and Grasim acquired a controlling stake in L&T Cement Ltd and the name was subsequently changed to UltraTech cement. The cement business of Grasim was demerged and vested in Samruddhi Cement Limited in May 2010, with Samruddhi Cement Limited consequently being amalgamated with UltraTech Cement Limited in July 2010. UltraTech Cement now is a subsidiary of Grasim, a part of the Aditya Birla Group. Post-merger of Grasim’s cement business, it is the largest cement company in India with a total cement capacity of 61.5mt (by 1QFY16) with a pan-India presence. It is the largest exporters of cement and clinker from India. Post-merger, it would be the largest cement company in India and 10th largest in the world. UltraTech has a potential to increase without incurring major capex by increasing utilization and blending, along with locational advantage, gives it the flexibility to either export or sell in the domestic market. Company’s allied businesses of white cement and RMC has lender stability to company’s overall performance. UltraTech’s management expects long-term cement demand to grow around 8 % while in the near term it could be challenging. In Jul’13 it commissioned a 3.3m-ton clinker plant in Karnataka, adding to its earlier commissioning in Mar’13 of similar capacity in Chhattisgarh. In Oct’13 it commissioned a 1.6m-ton grinding unit in Jharsuguda, Orissa, adding to its earlier commissioning of similar capacity in Hotgi, Maharashtra. The balance five associated grinding units will be set up in 4QFY14 and FY15. During 2Q, Ultratech acquired JaiPrakash Associates’ 4.8m-ton unit in Gujarat, lifting its capacity to 59m tons, while ongoing expansions would further that to 70m tons by Mar’15. The transaction was at an Enterprise Value of Rs. 3,800 Cr (US$125 a ton) and is expected to be completed only by 1QFY15 given multiple approvals required. Looking at the current quarterly results which showed high operating leverage, especially post commissioning of new capacities in 1QFY14, could result in volatile earnings. Post weak pricing environment during monsoon, cement prices and demand are expected to pick-up post monsoon. Structural increase in cost base (both capex and opex) would necessitate into higher cement prices. Revival in cement demand would be key catalyst for the stock performance.

Outlook and Valuation:

UltraTech is the 10th largest cement manufacturer in the world making it a significant global player. It has grinding units, jetties, bulk terminals and integrated plants all across the world. UltraTech Cement is the country’s largest cement and clinker exporter, catering to export markets in countries across the Indian Ocean, Africa, Europe and the Middle East. Such diverse presence across the countries has helped UltraTech to leverage economies of scale and enable it to become a name to reckon within the international market. UltraTech reported its Q3, and reported an average realization of Rs. 4,650 a ton down by 2 % yoy. At 10.3m tons, volumes of grey and white cement, clinker, wall putty rose by 1 % yoy and 8 % on qoq. The Grey cement sales were up 0.6 % yoy and 8 % qoq, those of white cement including wall putty were up 10 % yoy. RMC revenue was at Rs. 450 Cr and that of white cement and wall putty it was Rs. 420 CR. UltraTech reported its EBITDA/ton, at Rs. 745, despite its lower-than-expected realisations. The benefit of lower coal prices (net of rupee devaluation) and optimisation of the fuel mix led to an 8 % yoy dip in power & fuel costs a ton. Freight inched up 4 % yoy chiefly due to a hike in diesel prices and a rise in freight charges. Higher other income, lower interest, depreciation and tax rate of 27 % led to better PAT. The outlook on UltraTech continuous to remain challenging, with demand growth in FY14 is likely to be around 5 %, though over the long run it is likely to be over 8 %. The key value drivers could be housing demand and infrastructure spending. UltraTech has commissioned 25 MW thermal power plants in Andra Pradesh. Overall, the company is investing around Rs. 13,700 Cr in 12.7mt capacities, CPP, marketing and logistic infrastructure, modernization/ up-gradation and in RMC business. The clinkerization plant of 3.3MT in Karnataka has been commissioned in 2QFY14, followed up with 1.6mt grinding unit at Orissa. Further, the company’s planned capacity of 2.9mt at Rajasthan plant including 2 split grinding units with capex of Rs. 2,100 Cr would commission by Mar-15, and this would take total capacity in India to 68mt. On Consolidation of Jaypee's Gujarat plant, UltraTech’s current valuations largely factors in for potential recovery in FY15, benefit of which would be diluted due to initial impact of Jaypee's Gujarat plant acquisition by 1HFY15. At the current price of Rs. 1705.70, the stock is trading at a P/E of 24.05 x on FY14E and 18 x on FY15 estimates. UltraTech could report and EPS of Rs. 70.90 for FY14E and Rs. 94.80 for FY15E. Ultratech Cements has good potential for upside and can touch price of Rs. 2092, One can continue to ACCUMULATE the stock and would advise investors to use declines in the stock to buy with a long term view. One can buy ULTRATECH with a target price of Rs. 1875.00 for Medium to Long term investment and for the SHORT TERM PLAYERS it should be Rs. 1790.00.

KEY FINANCIALS	FY13	FY14E	FY15E	FY16E
SALES (₹ Crs)	20,017.90	20,070.00	23,030.00	26,390.00
NET PROFIT (₹ Cr)	2,655.40	1,940.00	2,600.00	3,130.00
EPS (₹)	96.80	70.90	94.80	114.10
PE (x)	17.80	24.30	18.10	15.10
P/BV (x)	3.10	2.80	2.50	2.20
EV/EBITDA (x)	9.70	12.70	10.10	8.30
ROE (%)	18.90	12.10	14.50	15.30
ROCE (%)	21.40	14.20	16.80	18.70

I would buy ULTRATECH CEMENT LTD for the short term would be Rs. 1790 and for the Medium to Long term for target of Rs. 1875. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 1569.24 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

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RETURN ON CAPITAL

GRASIM IND : LEADER IN VSF & CEMENT SECTOR !!!

Scrip Code: 500300 / GRASIM

CMP:  Rs. 2504.85; Accumulate at Rs. 2480 - Rs. 2505 current levels.
Short Term Target : Rs. 2800; Medium to Long term Target: Rs. 3060; STOP LOSS – Rs. 2281.00; Market Cap: Rs. 22,992.79 Cr; 52 Week High/Low: Rs. 3510.00 / Rs. 2105.65.

Total Shares: 9,17,93,094 shares; Promoters : 2,34,28,918 shares –25.52 %; Total Public holding : 6,83,64,176 shares – 74.48 %; Book Value: Rs. 1102.68; Face Value: Rs. 10.00; EPS: Rs. 128.46; Dividend: 225.00 % ; P/E: 19.49 times; Ind. P/E: 13.86; EV/EBITDA: 4.93.

Total Debt: 8,427.34 Cr; Enterprise Value: Rs. 31,192.68 Cr.

GRASIM INDUSTRIES: GRASIM IND was incorporated in 1947 and is based in Gwalior, Madhya Pradesh, India. The company was earlier known as Gwalior Rayond Silk Mfg (Wvg). Co. Ltd and changed its name to Grasim Industries on 22 July 1986. Grasim Industries is a flagship company of Aditya Birla Group. Grasim Industries Limited engages in the manufacturing and sale of Viscose Staple Fibre (VSF), cement, chemicals, and textiles worldwide. The company’s products include grey cement, white cement, chemicals, sponge iron, and textiles. The company’s VSF is a biodegradable fibre used in apparels, home textiles, dress material, knitted wear, and non-woven applications; and cement products comprise grey and white cement, and ready mix concrete. The company’s chemical products consist of rayon grade caustic soda; stable bleaching powder used in water purification, sanitation, and as a bleaching agent; poly aluminum chloride used in water treatment, paper sizing, and effluent treatment; and chloro sulphonic acid used in vinyl sulphate, the raw material for dyes and intermediates, saccharin, drugs, and pharmaceuticals. The company’s textile products include fabrics, synthetic yarns, worsted dyed yarn spun, and branded suiting under the brand names Grasim and Graviera. Through its subsidiary, Grasim Industries Limited sells its products through a network of 50 showrooms, as well as through 200 wholesalers and 25,000 multi-brand outlets. In August 2011 Grasim Industries acquired Aditya Birla Power Ventures Ltd and on March 2012 it acquired 33.33 % interest in Aditya Group AB, Sweden. Grasim industries is locally compared with ACC, Jaiprakash Associates ltd, Ultratech Cement ltd, Century Textiles and Industries ltd and globally compared with Lafarge Cement Zambia PLC, Oman Cement Company, Bamburi Cement, Holcim Liban, Kuwait Cement Company

Investment Rationale:

Grasim Industries is India’s one the best and biggest VSF & Cement Company. Phase I of the Harihar captive Power Plant of 20 MW, Karnataka, and expansion of 18,250 tons per annum was commissioned in Sep’12; phase II of similar capacity in May’13. The Greenfield project at Vilayat, Gujarat, (120,000 tons) will be commissioned in 3QFY14 in a phased manner. A major revamp of the Nagda plant has begun, to be completed in phases over the next two years. The fresh capacities and upcoming projects would support strong volume growth, starting 2HFY14. Company has commissioned 3.3MT clinkerisation plant in Karnataka. It had already commissioned clinker unit of 3.3MT at Chattisgarh and a grinding unit of 1.55MT at Hothi, Maharashtra during Q4FY13. Cement grinding capacity will be operational in phases in line with clinker production. Company has further sanctioned a capex of Rs 21 bn towards setting up of grinding units, modernization and RMC plants across the country. Company expects volume increase to reflect from H2FY14 from the recently commissioned capacities. Looking at the capacity expansion underway in both cement as well as the VSF segment, a boost in revenue may be seen from volumes. The cement segment of Grasim is through Ultratech where Grasim hold 60.3 % stake. The capacity in Ultratech is seen to grow from 52.5 Million Tonnes Per Annum to 54.5 MTPA during June 2013 quarter while 10 MTPA capacity expansions are underway. The muted demand and realisation in Cement is likely to get a boost once the monsoon season gets over. The global industry scenario seems to be improving. The demand supply imbalance in China and high cotton inventory continued to impact VSF realisation with sharp decline in May 2013 but stabilisation was seen in July onwards. With the commissioning of Harihar Expansion the production was up by 5 % on year on year basis. The Kharach Unit operated at low capacity for 45 days due to repairs of water canal supplying canal by state government but with the new reservoir at Nagda ensured no loss of production. Due to depreciation of Rupee the realisation remained under pressure in line with the global trend.

Outlook and Valuation:

Grasim Industries is well placed to take advantage of capacity expansion in both its segments. It is expected that government may increase spending before election which will in tuen boost the demand from rural India. The water scarcity problems that had hit the demands in Karnataka and Maharashtra are expected to get resolved. The subdued stock prices here offers a good opportunity for the investors to enter the stock and given the likely recovery in the cement business and with improving balance sheet the stock somewhat provides a defensive opportunity in this volatile markets. The 1QFY14 VSF volumes went up 0.7 % YoY, the realisations was at Rs. 126/kg which saw a dip of 8.3 % YoY. Realisations were hit by a demand-supply imbalance in China and depressed cotton prices due to huge cotton inventories. Despite the Kharach unit operating at low capacity for 45 days due to water supply issues, production rose 5 % YoY. PAT slid 17 % YoY but was higher than expected due to a lower tax charge of 6.6 % of PBT. Grasim expects prices in the near term to be influenced by the trend in cotton prices and recovery in the global economy mainly from China and US. The long-term outlook is bright on a rising population, developing-markets consumption and a preference for comfort fabric leading to a rise in demand for quality cellulosic fibre. Management expects range-bound VSF prices and margins in the near term. Expect profitability in the rest of FY14 to be better, led by expansion at Harihar, Vilayat, and a marginal recovery in VSF prices. At current price of Rs. 2504.85, the stock is trading at 21.97 x P/E for FY14E and company could report an  EPS of Rs. 114 for FY14E and Rs. 135 for FY15 estimates. One can buy GRASIM IND Limited with a target price of Rs. 3060.00 for Medium to Long term investment. And for the shorter term the target could be Rs. 2800

SOTP Valuation :-

Business Division	Value Per Share (in. ₹ )
VSF Division	374.15
Value of Chemical Division	108.04
Less :NET DEBT (standalone)	(173.76)
TOTAL	308.43
60.3 % in Ultratech @20% holding disc.	2534.34
Investments @20% holding disc.	216.56
TOTAL VALUE PER SHARE	3059.33

KEY FINANCIALS	FY12	FY13	FY14E	FY15E
SALES (₹ Crs)	4,876.30	5,181.40	5,546.00	6,635.80
NET PROFIT (₹ Cr)	1,177.60	1,021.60	1050.60	1,234.80
EPS (₹)	128.00	111.00	114.00	135.00
PE (x)	19.90	22.90	22.30	19.00
P/BV (x)	2.60	2.30	2.10	2.00
EV/EBITDA (x)	18.70	22.70	22.20	15.90
ROE (%)	13.70	12.80	10.00	10.80
ROCE (%)	10.60	7.80	6.50	8.10

I would buy GRASIM INDUSTRIES with a price target of ₹ 3060 for Medium to Long term target, for Short term target could be Rs. 2800. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or ₹ 2281.00 on every purchase. (Why Strict stop loss of 8 % ?) - Click Here

*As the author of this blog I disclose that I do hold GRASIM INDUSTRIES LTD in my investment portfolio. 

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RETURN ON CAPITAL

ULTRA TECH CEMENTS: CEMENTING STRONGLY AHEAD !!!

Scrip Code: 532538 / ULTRACEMCO

CMP:  Rs. 1837.75; Buy at every dips.
Medium to Long term Target: Rs. 2066; STOP LOSS – Rs. 1690.73; Market Cap: Rs. 50,369.81 Cr; 52 Week High/Low: Rs. 2154.20 / Rs. 1212.05

Total Shares: 27,40,84,137 shares; Promoters : 17,36,05,057 shares –63.34 %; Total Public holding : 10,04,79,080 shares – 36.66 %; Book Value: Rs. 469.06; Face Value: Rs. 10.00; EPS: Rs. 102.00; Div: 80.00 % ; P/E: 18.17 times; Ind. P/E: 19.84; EV/EBITDA: 10.02.

Total Debt: 3,808.13 Cr; Enterprise Value: Rs. 54,177.94 Cr.

ULTRATECH CEMENT LIMITED: ULTRACEMCO was incorporated in 2000 and is based in Mumbai, India. It was formerly known as Ultra Tech Cemco Limited and changed its name to ULTRATECH CEMENT Ltd on October 2004. It’s a subsidiary of Grasim Industries Ltd from Aditya Birla Group. The Company is engaged in the business of cement and cement related products. It manufactures and markets Ordinary Portland Cement, Portland Blast Furnace Slag Cement and Portland Pozzalana Cement. UltraTech Cement Limited, together with its subsidiaries, primarily engages in the manufacture and sale of cement in India and internationally. Its products include ready mix concrete; building products, including waterproofing solutions, polymer modified mortar, lightweight autoclaved aerated concrete blocks, thin layer jointing mortar, and ready mix plaster; and white cement. The Company also manufactures ready mix concrete (RMC). UltraTech Cement is an exporter of cement clinker. The Company has an annual capacity of 23.1 million tons. The Company has 11 integrated plants, one white cement plant, one clinkerisation plant in the United Arab Emirates, 15 grinding units - 11 in India, two in the United Arab Emirates, one in Bahrain and Bangladesh each and five terminals - four in India and one in Sri Lanka. In the 2011, its wholly owned subsidiary, UltraTech Cement Middle East Investments Limited (UCMEIL) acquired ETA Star Cement together with its operations in the United Arab Emirates, Bahrain and Bangladesh and acquired management control. On July 1, 2010, Samruddhi Cement Limited (Samruddhi) amalgamated with the Company.  The Company's subsidiaries include Dakshin Cement Limited, UltraTech Cement Lanka (Pvt.) Ltd. and UltraTech Cement Middle East Investments Limited. The company is compared to Ambuja Cements Ltd, ACC Limited and Rain Commodities Limited domestically.

Investment Rationale:

Ultratech Cement Limited is India's largest manufacturer of cement with an installed capacity of 52 Million Tonnes Per Annum. Ultratech’s massive 10 mtpa capacity addition program is nearing completion. The 1 mtpa Surat grinding unit is expected to be commissioned by 4QFY13. Ultratech board has sanctioned an additional capex of Rs. 1000 Cr towards modernization and setting up of Ready Mix Concrete (RMC) plants across the country. This brings the total capex under implementation to about Rs. 11400 Cr. The Company has entered into a Share Purchase Agreement with the shareholders of Gotan Limestone Khanij Udyog Pvt. Ltd (GKU) and has acquired GKU’s entire equity stake. Consequently, GKU has become a wholly owned subsidiary of the Company with effect from July 23^rd, 2012. Through this acquisition Ultratech is looking to enhance its white cement capacity. Ultratech’s revenues for Q3FY13 improved by 6 % YoY led by improvement in cement realizations. However, on a sequential basis, cement realizations witnessed a marginal decline. An average cement prices at the end of Q3FY13 witnessed a correction sequentially and stood at Rs. 284/bag. Correspondingly, company's realizations (including RMC) during Q3FY13 stood at Rs. 4690 per tonne as against Rs. 4760 per tonne during Q2FY13 adjusting with white cement, wall care putty and cement export revenues. The combined grey cement and clinker sales volume stood at 9.62 MT during Q3FY13 as against 9.7 MT during Q3FY12. Export cement and clinker volumes stood at 0.32 MT at approx. price of $55/tonne for cement and approximately $45/tonne for clinker. Company is in the process of setting up 4.8 MT plant at Raipur, Chattisgarh and 4.4 MT plant at Malkhed, Karnataka along with a captive power plant of 75 MW and waste heat recovery plant of 45 MW. These new capacities are likely to get operational by mid FY14. The company is expected to dispatch about 41 MT for FY13 translating into revenues of around Rs. 20,000 Cr for FY13 & for FY14 the estimates for volumes are expected to grow to 48.9 MT with expected revenues of Rs. 25,500 Cr for FY14. 

Outlook and Valuation:

Ultratech's revenues for Q3FY13 improved by 6 % YoY led by improvement in cement realizations. However, on a sequential basis, cement realizations witnessed a marginal decline. Company’s operating margin for Q3FY13 remained same on yearly basis despite the higher cost and improvement in cement prices. The Net profit performance was boosted by strong operating margins and higher other income. UltraTech’s average realizations were up 8 % YoY to Rs. 4,760 per ton. At 10.2 m tons, volumes for grey cement, clinker, white cement & wall putty dipped by 1.5 % YoY but up 7.1 % QoQ. Grey cement sales were up by 7.1 % QoQ which are in line with the industry growth rate. RMC recorded revenue of Rs. 500 Cr up by 47 % YoY and white cement and wall putty recorded Rs. 400 Cr up by 18 % YOY. Ultra Tech’s Average EBITDA/ton stood at Rs. 1,005/ton. The increase in the price of diesel and railway freight mainly led to an 18 % YoY rise in raw material cost and a 7 % YoY rise in freight. Benefit of softening coal prices was partly offset by the rupee depreciation against the dollar, leading only to a minor dip of 2 % YoY in power & fuel costs per ton. Company’s higher other income also boosted Profit after Tax growth of 9 % YoY. Company’s management expects cement demand to grow over 8 % in the long term even as the surplus scenario will continue in next three years. The two new units at Chattisgarh and Karnataka are likely to start by early FY14, taking total capacity to 59.5m tons. During 3QFY13, the Ministry of Coal, de-allocated the company’s coal block (allocated jointly with a JV partner) in Chattisgarh. The company has filed against the order and obtained a stay in this regards. The Competition Commission of India (CCI) has slapped 11 cement companies with a fine of Rs. 6,714.83 crore for price cartelisation, the highest penalty ever imposed by the fledgling, but increasingly assertive, anti-trust regulator. 11 firms were found guilty of price rigging. These 11 firms include ACC, Ultratech Cement, Grasim Cement (now a part of Ultratech), Jaypee Cements, Lafarge India, Jk Cements, India Cements, Madras Cement, Century Cements, Binani Cements and Ambuja Cements. The Industry body Cement Manufactures Association has also been fined. These 11 firms and the association are drawing up plans to question the legality of the case when it comes up for hearing before the Competition Appellate Tribunal (COMPAT the 3 member tribunal) on 29 January 2013. In any case any adverse decision would mean the blow of Rs.1175.40 Cr on Ultratech which is 6 % - 7 % of its total sales. Cement prices rose to all time high of Rs.330/bag in middle of 2012, & looking at the strong recovery going forward cement company will be have boost in their profitability. The clarity on the CCI investigation report should be a major trigger for the stock. At current price of Rs. 1837.75, the stock is trading at 19.2 x P/E on estimated EPS of Rs. 95.30 for FY13E and 16 X P/E on the estimated EPS of Rs. 114.80 for FY14E. Ultratech Cements is a good buy at the current market price & one can ACCUMULATE the stock and is advised to use declines in the stock to buy with a long term view with a target price of Rs. 2066.00 for Medium to Long term investment.

KEY FINANCIALS	FY12	FY13E	FY14E	FY15E
SALES (Rs. Crs)	18,158.30	20,705.50	24,384.50	29,484.40
NET PROFIT(Rs. Crs)	2,369.60	2,611.40	3,147.00	3,850.00
EPS (Rs.)	86.50	95.30	114.80	140.50
PE (x)	22.10	20.00	16.60	13.60
P/BV (x)	4.10	3.50	3.00	2.50
EV/EBITDA (x)	13.10	11.40	8.90	6.80
ROE (%)	20.10	18.60	19.00	19.60
ROCE (%)	17.60	18.00	19.50	21.20

I would buy UltraTech Cements LTD with a price target of Rs. 2066 for Medium to Long term. As I always say, I am a long term believer in markets & I do respect the markets and will keep a strict stop loss of 8 % or Rs. 1690.73 on every purchase. 

*As the author of this blog I disclose that I do hold Ultra tech Cements LTD in my investment portfolio.

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