UltraTech Cement's (UTCEM) Q4FY11 results were ahead of expectation as better realisations and tax write-back boosted profits. While quarterly volumes crossed the 10mn mt mark, blended realisations grew 10.2% QoQ to Rs4.2k/mt. Revenues stood at Rs45.6bn. Contrary to expectations of an increase, power & fuel costs declined which in tandem with better realisations led to a sequential doubling in adjusted profits to Rs6.1bn as against our estimate of Rs5.1bn. A tax write back of Rs1.2bn further boosted reported profits to Rs7.3bn.

Volumes stagnant: Adjusting for the merger of Samruddhi Cement, total volumes for the company remained flat YoY at 10.4mn mt. While northern region witnessed a pickup, southern and central regions were sluggish. White cement dispatches too were flat at .15mn mt. Blended realisations jumped 10.2% QoQ to Rs4.2k/mt as north and west regions witnessed a substantial price increase. Net revenues at Rs45.6bn were ~8% higher on a proforma basis.

Lower power & fuel cost boosts margins: The recent spike in international coal prices was expected to inflate the power bill. However, power & fuel costs per mt declined 2.5% QoQ. This along with growth in realisations translated to a 420bps QoQ expansion in margins to 23.9% as against our estimate of 22.7%. EBITDA/ mt was 34% higher QoQ at Rs1,000. Additionally, a lower tax rate (850bps QoQ) led to QoQ doubling of adjusted profit to Rs6.2bn. Capex plan: The company reiterated its capex of Rs100bn to be incurred over the next three years. Capacity of 9.2mn mt will be added through units at Chhattisgarh and Karnataka.

Outlook: We have revised our volume estimates downwards by 3.5% and expect a volume of 40mn mt in FY12. We expect margin to contract going forward owing to increase in imported as well as domestic coal prices. However, due to a lower tax rate our FY12 earnings estimate has increased 2.5% to Rs70.7. We have introduced FY13E earnings of Rs94.5.