UltraTech hosted conference call on April 29, 2024. In the conference call the company was represented by Mr Atul Daga-Executive Director and CFO.

Key Takeaways of the call

Consolidated revenues for the quarter stood at Rs 20,069 crore up 9% YoY in Q4FY2024.

Consolidated revenue for the year stood at Rs 70908 crore up 12% YoY in FY2024.

In FY2024, the company witnessed volume growth of 13% YoY and is the third straight year of double digit growth. In absolute terms the company sold 94 MT of cement in FY2022 which has crossed to 119 MT in FY2024.

In Q4FY2024 consolidated volumes stood at 35.08 MT up 28% QoQ and 11% YoY.

All India cement capacity utilization increased by 200 bps to 71%, however capacity utilization for the company was significantly higher at 85% in FY2024 making consistently in roads to the markets. Capacity utilization for Jan-march quarter of FY2024 stood at 98% for the company.

The growth is achieved on back of rapid growth in the Indian economy. The Indian economy is expected grow in the range of 6.5%-6.8% in the current year and cement as an industry is expected to grow higher than the economy.

NHAI has expended over Rs 207000 crore in FY2024 highest ever a jump of 20% YoY. Construction of highways touched a record of 10300 kms in FY2024 almost 35 kms per day.

Realization: Realizations declined by 6% QoQ across the country. However, the longer period average prices have grown at a CAGR of 3.5% in the last 5 years and the input cost also have grown at a CAGR of 3.5% in the last 5 years.

Prices have improved in several markets. Prices have improved in Eastern, Southern and Maharashtra market.

RMC: The company ended the year with 307 RMC plants serving the customers all over the country. RMC consumes around 2.5 MT of cement for the company. This business is small however is growing rapidly for the company.

RMC is EBITDA accretive for the company.

Ultratech Business Solutions (UBS) :The company has the largest retail foot print in the country with 3900 stores which is called Ultratech Business solution. The company had 16% of the sales through this retail platform in Q4FY2024. UBS is an one stop shop for IHB for all their home building requirements.

Cost:

Fuel cost when compared to Q3 remained at same level and has stabilised. However, the company is not in position to provide guidance on back of geopolitical issues.

Fuel consumption cost stood at Rs 2.03 per K cal in Q4FY2024. The company expects the same to come down however material decline is expected in Jan-march quarter of Q4FY2025.

Baltimore bridge collapse and Iran war kind of situations will have an impact on the cost of fuel.

Other operating income: Increase in other operating income in Q4FY2024 is on account of incentives received and volume play kicking in.

Other Cost:

Operating leverage benefits resulted in stable other expenses.

EBITDA per ton stood at Rs 1185/ton for India operations, an increase of Rs 125/per MT.

Cost efficiencies, continues increase in green power mix, lower fuel cost, increase in alternate fuel ratio and operating leverage continue to improve the cost parameters. Over the next three years as the company continues to grow the company expects operating cost per ton to come down by Rs 200-300/ per ton.

Decline in operating cost will be led by increase share of green power which is 24% to 60% or higher by FY2027. ( WHRS fuel cost is lower by 90% when thermal power and solar power by 40% when compared to thermal power); increase in ratio of clinker to cement from the current 1.44; the company expects lead distance to come down; Alternate fuel ramp up from current 5-6% to 15-16% and by operating leverage kicking in.

The company has a lead distance of around 400 kms and even a decline in 25 kms will lead to decline in Rs 75/ton.

Expansion:

All the company’s organic capex expansion is on track.

The company plans to increase the domestic capacity to 183.5 MT excluding Kesoram’s 10.75 MT capacity. Also the company has put on hold 2.7 MTPA capacity expansion at Hotgi, maharastra grinding unit as Kesoram has a plant in that market.

The company has received the CCI approval for Kesoram Industries acquisition. The company plans to merge the same from effective April 01, 2024 once the company receives all regulatory approvals. The company is expecting the nod from SEBI and stock exchanges before the company files the scheme with NCLT. Kesoram has refinanced its debt and has reduced the cost of its debt by 50%.

Last week the company acquired a grinding unit in Maharashtra and with surplus clinker, this acquisition provides the company an unique opportunity to grow in the fast growing state of Maharashtra.

CAPEX: The company expects to incur CAPEX of around Rs 9500 cr in FY2025.

WHRS: Company says about 150 MW of Waste Heat Recovery Systems (WHRS) will get commissioned in the next two years.

Net Debt:The company expects to be zero net debt by March 2025 excluding Kesoram Industries.

Consolidation: South market is fragmented in nature as such the company believes that there will more opportunities for consolidation in Southern Markets.

The company will look at profitable growth opportunities for mergers and acquisition.

Outlook:

India is urbanising and vertical houses are increasing but still India remains a individual home (IHB)builder market. IHB is the biggest drivers of demand in India for cement. 

The company expects some moderation in demand going forward in FY2025. However, the company expects slowdown to be shorter than earlier years primarily due to private sector housing momentum has also picked up. The company expects high single digit growth in FY2025 for the industry and Ultaratech is expected to do better than that.

The company wants to grow with the market. India is a growing market. If there is a opportunity the company will add capacity and the company will have organic opportunities to grow as it has enough mine and land.

Despite the company operating at 98% capacity utilization in Q4FY2024, it has sufficient capacity to grow and keep growing. The company expects to add 15-17 MT capacity in FY2025.

Prices are expected to remain stable to positive going forward in FY2025. Players have not thought about price increases because of softened input prices, their profits are getting delivered.

Realizations are purely demand and supply driven.

Dividend: The board of directors have recommended final dividend of Rs 70 per equity share.