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Morningstar Equity Analyst Report | Report as of 23 Oct 2014 | Page 1 of 9

UltraTech Cement Ltd 532538 (XBOM)
Morningstar Rating

Last Price

underreview 2,406.30 INR
23 Oct 2014

Fair Value Estimate

Price/Fair Value

Dividend Yield %

Market Cap (Bil)

Industry

Stewardship

2400.00 INR

1.04

0.37

660.19

Building Materials

Standard

22 Oct 2014

22 Oct 2014

22 Oct 2014

Morningstar Pillars

Analyst

Quantitative

Economic Moat
Valuation
Uncertainty
Financial Health

Narrow
underreview
High

Narrow
Fairly Valued
High
Moderate

Source: Morningstar Equity Research

Quantitative Valuation
532538
r

IND

Undervalued

Fairly Valued

Price/Quant Fair Value
Price/Earnings
Forward P/E
Price/Cash Flow
Price/Free Cash Flow
Dividend Yield %

Overvalued

Current

5-Yr Avg

1.05
30.5
18.9
19.1
57.8
0.37


17.6

12.3
-946.9
0.51

Sector Country

0.81
15.4
11.5
7.9
15.8
2.01

0.86
16.6
18.4
7.4
12.7
1.25

Source: Morningstar

Bulls Say
OThe potential to increase volume through higher
utilization without higher capital expenditure
gives Ultratech significant leverage to any
economic upturn.
OThe low value-to-weight ratio of aggregates
and cement makes long-distance transportation
uneconomical. Markets become highly localized,
with strong barriers to entry for distant
competitors.
OUltratech’s robust financial health positions it
favorably to lead industry consolidation.
Bears Say
OWeaker economic conditions, coupled with
high interest rates, are currently weighing on
cement demand.
OIn the past, key markets have been subject to
intense price competition and economic
headwinds, including southern India. There's no
guarantee other markets such as western India,
where Ultratech has a strong presence, won’t fall
prey to the same dynamics in future years.
ODeregulation of transport fuel prices and rising
railway freight cost could cap on margin
improvement in the near term.

Narrow moat-rated Ultratech will lead the industry's consolidation.
Piyush Jain, 23 October 2014

Analyst Note

Investment Thesis

Ultra Tech’s second-quarter adjusted EBITDA shot up by
28% to INR 9.3 billion over the prior year but below our
estimates of INR 9.5 billion. With additional of capacity
this quarter, cement and aggregate volumes were 12% up
over the prior corresponding period. Blended realizations
rose by 5% as strong price hikes taken in June were able
to offset the seasonal softening of prices in the second
quarter. Price realizations were slightly lower than our
estimate due to about a 7% fall in prices in the key North
Indian market during the quarter. Adjusted EBITDA
margins rose to 16.4% from 15.1% over the prior year. An
increase in borrowings costs is in-line with our annual
forecast and we continue to expect higher interest
expense over the next three years as Ultratech pursues
debt funded acquisitions.

Ultratech is India’s largest producer of cement and
aggregates. Earnings growth is highly dependent on the
domestic construction cycle, and on infrastructure
spending. The domestic economic downturn over the last
18-24 months has weighed heavily on demand for building
materials.
Ultratech’s main business--cement production--is
characterized by high capital intensity, solid barriers to
entry, high energy intensity, and a low value/weight ratio
that promotes regional markets, rather than national
markets. Cement is made from limestone, sand, alumina,
and iron ore; production facilities are usually built in close
proximity to the large limestone, sand, iron ore, and
alumina deposits from which cement is manufactured.
The need to heat these materials in a kiln to 1,500 degrees
celsius makes power and fuel among the largest single
production-cost inputs.
Ultratech’s own captive thermal power plants meet 80%
of its power requirements, and cushion it from volatile
fuel cost swings. The company's strong investment in
plant efficiency has helped established solid
cost-competitiveness in regional markets. Freight is one
of the two highest cost inputs, which ensures cement
plants typically cater to regional markets within a radius
of few hundred kilometers. Depending on cost of
production, local demand, and distance to customers,
some regions do allow incumbents pricing power.
Ultratech has a widespread distribution network across
India, where retail sales of cement through distributors
account for a significant portion of demand. In our view,
Ultratech being the largest pan India player, will be the
prime beneficiary of an acceleration in demand growth
for building materials as construction activity rebounds,
and as the government commences its large scale
infrastructure construction program. Also, we expect
Ultratech will lead the industry consolidation, as smaller
competitors struggle to achieve capacity expansion that
keeps pace with demand growth, and rising power and
freight costs.
Piyush Jain, 23 October 2014

We are increasing our fair value to INR 2,400 from INR
2,319 per share due to the time value of money since we
last reviewed Ultratech. The shares remain close to fairly
valued. We maintain our narrow economic moat rating,
which is anchored by Ultratech’s strong pricing power in
key markets. The industry-level entry barriers that benefit
Ultratech stem from the proximity to raw material sources,
the capital intensity of manufacturing plants, and cement’s
low value-to-weight ratio. High fair value uncertainty
reflects exposure to construction and housing which are
cyclical and linked to economic activity.
We are estimating about 10% volume growth over the
next five years. Our capital expenditure estimates include
about 10 million to 15 million tons of acquisitive growth,
as we believe that Ultratech, being the market leader and
possessing a strong balance sheet, will continue to pursue
consolidation in the cement industry. Long-term demand
for building materials remains attractive as the Indian
government pursues its spending on infrastructure and
housing.

Economic Moat
Piyush Jain 23 October 2014

Ultratech Cement’s narrow economic moat is attributable
to (1) intangible assets, and (2) cost advantage. It's
predicated on Ultratech's strong pricing power in key
markets, even amid recent low demand and a sluggish
business environment. The economic slowdown in both

© 2014 Morningstar. All Rights Reserved. Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. Data as originally reported. The information contained
herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without
written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869. See last page for important disclosures.

?

owing to increased government expenditure on infrastructure and housing.341 19. Housing accounts for more than two thirds of India's total cement consumption. and should not be considered a solicitation to buy or sell any security. any new entrant in the cement industry faces obstacles that include high capital costs.080 14. Relatively high shipping costs for both raw materials and for the finished product tips the scales in favor of regional producers. In our view. freight costs figure heavily in overall production costs. call +1 312-696-6100. Domestic regional producers.18 Holcim Ltd HOLN CHF 21. Ultratech Cement has still managed to achieve returns on invested capital (ROIC) that exceed its cost of capital (WACC). east.72 14.917 16. coal supply linkage for captive power approval or power supply from the state grid. and rising per capita income. southern-based competitors. west. To license the research. such as Ultratech. limestone reserve linkage. The housing sector will drive cement demand © 2014 Morningstar. Ultratech Cement holds about 13% to 15% market share in north.30 26. such as Ramco Cement. All Rights Reserved. about 80% of its fuel requirements are fulfilled internally. benefits accrue to local producers because of their cost advantage. Overall. will continue to act as a differentiator for Ultratech. long gestation periods in seeking state or government approvals for land. the acquisition of substantial land. To order reprints. correct. Ultratech Cement’s geographic distribution reach reduces its exposure to regional price variations. In our view. and remain competitive.88 17. If local demand is high enough to require costly imports. Infrastructure will derive demand from the planned government spending of USD 1 trillion over the 2012-17 time frame. Even so. This should grow over time. which reduces costs and keeps margins high.00 INR 1. central and eastern India. the housing sector is cement's biggest demand driver. India’s per-capita cement consumption remains subdued. Ultratech Cement’s freight and forwarding costs traditionally account for about one third of the total operating costs. invariably. you may use this report only in the country in which its original distributor is based. Other major consumers of cement include the infrastructure. central. With its pan-India presence.067 11. Entry barriers in the cement industry stem from manufacturing plants near raw material sources.30 INR 23 Oct 2014 Fair Value Estimate Price/Fair Value Dividend Yield % Market Cap (Bil) Industry Stewardship 2400. The detrimental impact of this scenario would be offset by better performance in another region for a company with a geographically broad business footprint.Morningstar Equity Analyst Report |Page 2 of 9 UltraTech Cement Ltd 532538 (XBOM) Morningstar Rating Last Price underreview 2. The information contained herein is not represented or warranted to be accurate. with about 674 megawatts (MW) of power capacity. coupled with favorable demographics.406. and cement’s low value-to-weight ratio. with cement produced in the south unlikely to get transported to the west. in the biggest market. See last page for important disclosures. while cement prices were moving 6% higher elsewhere in the Indian market. and establishing a distribution network. therefore. Data as originally reported. regulatory approval. complete.04 0. Its 30% market share in western India reflects its strong presence in that market. currently averaging fewer than 200 kilograms. commercial construction.95 HeidelbergCement AG HEI EUR 10. Indian markets work in the form of regional clusters as south. In India. Ultratech’s fully integrated cement plants have their own captive thermal power plants.679 91. We’re upbeat on cement demand from the construction industry over our forecast period. This report is for information purposes only. with potential to grow to about 38% by fiscal 2015 as it completes consolidation of the Jaypee capacity. Ultratech Cement is the market leader by capacity. For example. at about 9%. Each cluster has its own. Additionally. unique price dynamics.S. ? .19 Building Materials Standard 22 Oct 2014 22 Oct 2014 22 Oct 2014 Close Competitors Currency (Mil) Market Cap TTM Sales Operating Margin TTM/PE Ambuja Cements Ltd 500425 INR 334. and where more than 30 companies compete in a highly fragmented market. and in other developed countries. and industrial construction sectors. Unless otherwise provided in a separate agreement. but has lower market share. Redistribution is prohibited without written permission.131 11. versus 500 kilograms in the U. Power or fuel costs are typically among cement companies' top two operating costs. would require substantial government assistance. Due to the low value-to-weight ratio of raw materials and finished products. which constitutes 40% of all of India’s capacity. south India.37 660. capital intensity. or timely. call +1 312-696-6869. are struggling with a 10% decline in cement prices and rising costs in the fourth quarter of fiscal 2014.37 the sector and the Indian economy resulted in pricing pressure in some regional markets where excess capacity was evident. as smaller players would find it difficult to invest in captive power along with investment in new capacities in a rising energy cost environment. including southern India. Overall. and north India. do not have to worry about distant competitors depressing prices by shipping high tonnages into the market. Thermal power plants are based on leased coal mines provided by the government and in our view.

Unless otherwise provided in a separate agreement.19 Building Materials Standard 22 Oct 2014 22 Oct 2014 22 Oct 2014 owing to the government initiatives for providing low income housing in urban and rural areas. the Indian cement industry has witnessed significant consolidation.2 times GDP growth. and the balance from other commercial construction. We see significant room for plant utilization to improve during an economic recovery. vacancy rates. Furthermore. primarily the Japanese yen and the U. we think the company faces risks in paying appropriate prices for potential targets.04 0. In the wake of May's general elections. This report is for information purposes only. one of India’s top four cement manufacturers. consistent with the trailing three-year average of 16%. In fiscal 2014. The higher growth would be driven by capacity acquisition. Margins will benefit from the industry’s inherent operating leverage. Construction activity consists of infrastructure. We forecast compound annual revenue growth of 14% during 2015-24. We use a 13% cost of equity assumption and a roughly 11. placing our average 9% projected growth rate in Ultratech’s cement production over the 2015-24 period on Risk Piyush Jain 23 October 2014 Ultratech’s fair value estimate carries a high uncertainty rating. Jaypee Cements. Ultratech’s business is primarily driven by construction activity.400 per share from INR 2. we think © 2014 Morningstar. you may use this report only in the country in which its original distributor is based.Morningstar Equity Analyst Report |Page 3 of 9 UltraTech Cement Ltd 532538 (XBOM) Morningstar Rating Last Price underreview 2. ready-mix concrete. with more than a quarter of its loans denominated in foreign currency. increased business activity and demand in sectors such as housing and infrastructure.30 INR 23 Oct 2014 Fair Value Estimate Price/Fair Value Dividend Yield % Market Cap (Bil) Industry Stewardship 2400.37 660. Fierce or irrational competition in regional markets that leads to unfavorable pricing also would compromise Ultratech Cement’s profitability. The strength of the housing construction market is a key risk for this business. This has helped Ultratech strengthen its western India business. call +1 312-696-6869. chose to exit western India by selling its entire capacity to the market leader. commercial/nonresidential. As Ultratech acquires further capacity in a high growth but consolidating industry environment. To order reprints. call +1 312-696-6100. and residential. and should not be considered a solicitation to buy or sell any security.S. This has led to soft demand for cement.north and east India. or timely. The information contained herein is not represented or warranted to be accurate. we don't think these advantages are strong enough to be sustained over a 20-year horizon.6% in 2019 from 15% in 2014 as volume recovers.6% weighted average cost of capital assumption. We believe the Holicim-Lafarge merger would also help in keeping prices stable in the Ultratech’s other key markets . Recently. Piyush Jain 23 October 2014 We are increasing our fair value estimate to INR 2. Recently. the leading edge of these expectations. driven by an economic slowdown and deferral of infrastructure projects and high interest rates. government budgets for infrastructure spending remain a key driver and risk factor to the segments’ performance. rising per capita income will continue to drive demand for luxury housing. and aggregates in some regional markets in India. we are forecasting margins to improve to 19. Operating margins during 2015-24 are projected at 17. while 20% comes from urban housing. as market leaders such as Ultratech and Ambuja have led the way. We have assumed an increase in the utilization ratio to mid cycle 85% by 2024 from 77% in 2014. dollar. so we don't think Ultratech has a wide economic moat. All Rights Reserved. Ultratech. About 40% of the demand comes from rural housing. The two largest cement groups now control nearly one third of the total domestic capacity. Also. which is highly dependent on economic conditions. This will be driven by an average volume growth of 9% and price growth of 4%. Steep energy costs that cannot be recouped through higher pricing are another threat. Our fair value estimate is predicated on the assumption of an eventual return to more normal business circumstances as the business cycle improves and infrastructure spending by the government increases. Ultratech cement has experienced a cyclical downturn in construction activity.319 per share due to the time value of money since we last reviewed Ultratech. The implied exit multiple in our discounted cash flow model is about 10 times enterprise value/EBITDA or EV/tonne of USD 200 for fiscal 2016. See last page for important disclosures. correct. However. However. Therefore. and interest rates are key determinants and risks to performance. broader commercial activity. Redistribution is prohibited without written permission. 20% from infrastructure. ? . We expect average annual GDP growth over our forecast period to be about 6% for the same period.00 INR 1. Consolidation has been concentrated more in the western and eastern regions. Data as originally reported. Indian cement growth typically tracks about 1.3%. we believe India's new government will be able to decisively implement the planned government spending on the infrastructure and housing sectors. To license the research. complete.406. Valuation Despite the diversification of its customer base across India. Meanwhile.

This report is for information purposes only. particularly through slower markets. This has come through both greenfield and brownfield expansions. and recently Jaypee Cement’s western India capacity acquisition. He is also the vice president of the Cement Manufacturers Association in India. and acquisitions.Morningstar Equity Analyst Report |Page 4 of 9 UltraTech Cement Ltd 532538 (XBOM) Morningstar Rating Last Price underreview 2. which makes it difficult to track any short-term issues which could potentially evolve into bigger challenges. or timely. We think management has done a good job managing the business. correct. Ultratech raised its dividend payout to 11% of net income. Ultratech management has remained committed to returning capital to shareholders through a dividend.04 0. Management Piyush Jain 18 June 2014 We assign Ultratech a Standard stewardship rating. international expansion during 2010-11 with the Star cement brand creation and associated three million tonne capacity in Middle East. call +1 312-696-6869. in our view.P. we're not impressed with the level of disclosure on its consolidated operations on a quarterly basis. To license the research. expansions.19 Building Materials Standard 22 Oct 2014 22 Oct 2014 22 Oct 2014 the company faces a considerable degree of currency risk. is the full-time director of Ultratech Cement Ltd. Over the years. All Rights Reserved. Data as originally reported. Significant moves during Birla’s tenure at the helm included a major cement acquisition in 2000. call +1 312-696-6100. In fiscal 2014.37 660. the purchase of Larsen and Toubro's cement division. Furthermore. we're satisfied with the fees and commission paid to its other directors. Puranmalka. as it's more likely to acquire business in India and outside India. The information contained herein is not represented or warranted to be accurate. However. along with acquisitions. a chartered accountant. which we think could be slightly higher. ? . with effective brand positioning. See last page for important disclosures. if introduced. The company has done a decent job growing. Finally. O. and six independent directors. He leads the Ultratech cement operations. stringent environmental regulations could impair Ultratech Cement's business.30 INR 23 Oct 2014 Fair Value Estimate Price/Fair Value Dividend Yield % Market Cap (Bil) Industry Stewardship 2400. and oversees its strategy. Political risk could manifest itself in the form of nationalization of assets or price controls on cement and building products.406. you may use this report only in the country in which its original distributor is based. with one full-time director. © 2014 Morningstar. Birla has transformed the group from having less than 8 million tonnes of capacity to an industry-leading behemoth. The chairman's annual compensation stood at 1% of 2013's net income. To order reprints. Still. The board of directors comprises 12 members. Kumar Mangalam Birla succeeded his father as chairman in 1995. Redistribution is prohibited without written permission. and should not be considered a solicitation to buy or sell any security. We expect it to remain closer to 10% in the long run. five nonexecutive directors. complete. boasting more than 50 million tonnes of capacity in 2014. Ultratech has been able to integrate all of the expansions seamlessly. both organically and through acquisitions. Unless otherwise provided in a separate agreement. We don’t expect Ultratech to increase the dividend payout ratio significantly. He joined the company as a trainee in 1976 and rose through the ranks over the years.00 INR 1.

Unless otherwise provided in a separate agreement. Our fair value estimate remains INR 2. and cement’s low value-to-weight ratio. call +1 312-696-6100. INR 59.6% on the prior year but below our estimates. To order reprints. were one of the key reasons for the fall in realisations. The industry-level entry barriers that benefit Ultratech stem from the proximity to raw-material sources that manufacturing plants require. as we believe that Ultratech. Redistribution is prohibited without written permission. but this was partially offset by a 4% fall in blended realisations. Long-term demand for building materials remains attractive as the Indian government pursues its spending on infrastructure and housing. Fair Value Estimate Increases to INR 2.1% over the prior year. The information contained herein is not represented or warranted to be accurate. Cement and aggregate volumes were 18. All Rights Reserved.37 660.19 Building Materials Standard 22 Oct 2014 22 Oct 2014 Analyst Notes Archive Ultratech’s Second-Quarter Margins Swing Wider. but the market was expecting higher profitability which had driven the stock ahead of its fair valuation. Recent price hikes will help improve the profitability of Ultratech's operations in south and east India. Blended realizations rose by 5% as strong price hikes taken in June were able to offset the seasonal softening of prices in the second quarter. We do not make any material change to our five-year forecasts. We maintain our narrow economic moat rating. which is anchored by Ultratech’s strong pricing power in key markets.5 billion.30 INR 23 Oct 2014 22 Oct 2014 Fair Value Estimate Price/Fair Value Dividend Yield % Market Cap (Bil) Industry Stewardship 2400. Higher Fuel and Power Expenses Produce a Weak First-Quarter Result for Ultratech Piyush Jain 28 July 2014 Ultratech's fiscal 2015 first-quarter net sales came in at © 2014 Morningstar. Weak Realisations.319 per share. which is underpinned by Ultratech's strong pricing power in key markets. the capital intensity of manufacturing plants. Our capital expenditure estimates include about 10 million to 15 million tons of acquisitive growth. High fair value uncertainty reflects exposure to construction and housing. capital intensity.400 Piyush Jain 23 October 2014 Ultra Tech’s second-quarter adjusted EBITDA shot up by 28% to INR 9. The first-quarter results affirm our forecasts. or timely. which are cyclical and linked to economic activity.Morningstar Equity Analyst Report |Page 5 of 9 UltraTech Cement Ltd 532538 (XBOM) Morningstar Rating Last Price underreview 2. Shares remain close to fairly valued.406.319 per share due to the time value of money since we last reviewed Ultratech.9%. All-India average cement prices have moved by about 9% in June to INR 322 per bag from INR 297 per bag.4% from 15. Long-term demand for building materials remains attractive as the Indian government pursues its spending on infrastructure and housing. and cement's low value-to-weight ratio.00 INR 1. you may use this report only in the country in which its original distributor is based. along with depressed demand owing to subdued economic activity. up 13.3 billion over the prior year but below our estimates of INR 9. We are estimating about 10% volume growth over the next five years.400 from INR 2. being the market leader and possessing a strong balance sheet. call +1 312-696-6869. and should not be considered a solicitation to buy or sell any security. Low price levels in Southern India. ? . Price realizations were slightly lower than our estimate due to about a 7% fall in prices in the key North Indian market during the quarter. Lower depreciation and higher other income cushioned the fall in core margins as net profit margin fell 1.6% to 11%. An increase in borrowings costs is in-line with our annual forecast and we continue to expect higher interest expense over the next three years as Ultratech pursues debt funded acquisitions. We maintain our narrow moat rating on the company. See last page for important disclosures. cement and aggregate volumes were 12% up over the prior corresponding period. Adjusted EBITDA margins fell 3. With additional of capacity this quarter. will continue to pursue consolidation in the cement industry.2% to 17. To license the research.04 0. Adjusted EBITDA margins rose to 16. reflecting stepwise deregulation of fuel in India. We are increasing our fair value to INR 2. correct. Our five-year forecast includes 10% compounded capacity addition buoyed by both organic and inorganic expansions to achieve this growth. High fair value uncertainty reflects exposure to construction and housing which are cyclical and linked to economic activity. complete. The shares remain close to fairly valued. Data as originally reported.9 billion.4% up on the prior year. The industry-level entry barriers that benefit Ultratech stem from the proximity to raw material sources. This report is for information purposes only. This was further aggravated by the rise in the freight and power expenses.

66 61. The Company’s products include Ordinary Portland Cement.3 -26.3 -946.3 1. 2014 ® ß . Data as originally reported.754 13.405 5.2 26.0 0.3 16. Ready Mix Concrete.57 5. complete.0 0.264 5.2 0.9 0.691 83. correct.13 274.4 7.9 0.777 28.3 33.310 57.9 19.704 Scores Momentum: — Standard Deviation: 29.751 7.4 221.0 71.0 0.0 55.868.8 37.3 12.033 37.077 1.619 -23.5 12.90 274.8 — — Profitability Return on Equity % Return on Assets % Net Margin % Asset Turnover Financial Leverage 54.772 16. you may use this report only in the country in which its original distributor is based.5 53.433 84.4 10.9 19.8 24. and should not be considered a solicitation to buy or sell any security.4 0.66 11.6 10.8 192.358 26. To license the research.3 0.20 80.0 7.42 -17.5 10.6 15.122 1.86 16.213 11.406.69 124.37 -30.719 7.0 13. This report is for information purposes only.00 5-Yr 2.177 18.9 26.357 40.5 12.0 214.Page Page 6 of1 9of 1 Quantitative Equity Report | Release Date: 23 October 2014 | Reporting Currency: INR | Trading Currency: INR UltraTech Cement Ltd 532538 Last Close Quantitative Fair Value Estimate Market Cap (Bil) Sector Industry 2.0 0.9 — — — — — — — — — — — — 80.042 6.0 Total Return % +/– Market (Morningstar World Index) Dividend Yield % Price/Earnings Price/Revenue Undervalued Fairly Valued Overvalued Monthly Volume (Thousand Shares) Liquidity: Medium 139 Financials (Fiscal Year in Mil) Revenue % Change 2010 2011 2012 2013 2014 TTM 71.379 -33.00 Total Return 52-Wk 2.3 0.7 17. Quantitative Scores Country of Domicile IND India Price Versus Quantitative Fair Value 2010 2011 2012 2013 2014 2015 Sales/Share Forecast Range Forcasted Price Dividend Split 3.7 136. Portland Pozzalana Cement.66 87.5 18.2 16.5 559.51 18.66 42.0 9.9 15.2 0.0 — Score 100 Quantitative Moat 80 60 40 20 0 2007 2008 2009 2010 2011 2012 2013 Financial Health Current 5-Yr Avg Distance to Default Solvency Score Assets/Equity Long-Term Debt/Equity 2014 Sector Median Country Median 0.87 274.3 0.4 17.6 7.31 274.6 18.6 13.920 -34.00 676 532538 r 699. Portland Blast Furnace Slag Cement.8 — Gross Margin % Operating Margin % Long-Term Debt 46.6 192.3 34.55 12.3 14.4 12.8 Current 5-Yr Avg Sector Median Country Median 8.034 -114 -0.9 0.983 -12.293.9 17.6 25.9 105.98 -1.00 371.561 10.8 — — — — — 23.611 32.8 12.6 — 12.3 0.6 15.4 1-Year 3-Year 5-Year 10-Year 1.380 2.1 2.8 12.358 9.2 -10.060 28.4 — — 2.437 1.065 8.3 2.91 2.00 558.802 3.40 22.2 34.3 60.8 0.9 19.42 97.425 -0.4 9.6 -28.58 78.81 15.37 3.2 — — Quarterly Revenue & EPS Revenue (Bil) Jun 2014 53.4 1.8 9.5 17.50 87.271 1.89 1.868.82 61. The information contained herein is not represented or warranted to be accurate. To order reprints.5 0.0 2013 — 2012 — 2011 — Earnings Per Share 2014 24.1 Operating Cash Flow Capital Spending Free Cash Flow % Sales 87.1 10. call +1 312-696-6869.69 1. and other building products.6 26.0 20.42 97.9 2012 2013 ©2014 Morningstar.931 -2.4 107.7 0.8 41.00 627.4 211.113 25.487 6.5 211.6 13.4 11.2 Current 5-Yr Avg Price/Quant Fair Value Price/Earnings Forward P/E Price/Cash Flow Price/Free Cash Flow Dividend Yield % Price/Book Price/Sales 1.635.83 1.3 171. White Cement.352 1.05 30.0 Profitability Return on Equity % Return on Assets % Revenue/Employee (Mil) — — 16.1 57.95 11.028 99 6 98 73 Quantitative Fair Value Estimate 1.9 16.8 18.1 1.1 10.2 r Basic Materials Building Materials UltraTech Cement Ltd is a cement manufacturing company.00 470.8 17.7 — 1.29 2013 — 2012 — 2011 — EPS % Change Free Cash Flow/Share Dividends/Share Book Value/Share Shares Outstanding (K) Total Equity Fixed Asset Turns Revenue Growth Year On Year % Sep — — — — Dec — — — — Mar — — — — Total 214.9 0.3 23.8 Growth Per Share Revenue % Operating Income % Earnings % Dividends % Book Value % Stock Total Return % 18.8 -0.6 543.857 2.9 10.409 0.2 0.3 2.071 49.56 660.985 1.5 16. Unless otherwise provided in a separate agreement.968 20.0 39.7 12.8 2.37 13. All Rights Reserved.1 36.37 30.405 5.9 0.9 — — 9.7 1.180 9.80 IND Undervalued Fairly Valued Overvalued Valuation Sector Median Country Median — 17.5 7.7 41.8 4.8 0.9 13.8 6.213 11.5 23.4 19.3 3.8 48.1 -17.8 0.6 2.8 24. call +1 312-696-6100.208 82.619 -23. Redistribution is prohibited without written permission.0 0.8 3.00 390.4 153.00 626.522 1.5 128.5 21.912 90.01 1.4 136.5 3.30 2.78 1.52 23.20 274.576 -24.9 51.667 Operating Income % Change Net Income 15.44 All Rel Sector Rel Country Quantitative Moat Narrow Valuation Fairly Valued Quantitative Uncertainty High Financial Health Moderate 97 10 90 68 99 6 96 76 2.471 19.51 3.3 22.5 0.2 15. or timely.1 29.9 6.25 1.867 1.

correct. From this rating. or timely. We’re looking well beyond next quarter to determine the cash-generating ability of a company’s assets because we believe the market price of a security will migrate toward the firm’s intrinsic value over time. Occasionally. The longer a firm generates economic profits. cost advantage. fair value and uncertainty. multiples. a company’s profits are more susceptible to competition. and should not be considered a solicitation to buy or sell any security. Our analysts conduct primary research to inform our views on each firm’s moat.0) lead to positive recommendations. and extreme. Efficient Scale ? . the wider the margin of safety around our fair value estimate before our recommendations are triggered. and efficient scale. We believe lower-quality no-moat companies will see their returns gravitate to- ward the firm’s cost of capital more quickly than companies with moats will. Companies with narrow moats are likely to achieve normalized excess returns beyond 10 years while wide-moat companies are likely to sustain excess returns beyond 20 years. we determine appropriate margins of safety: The higher the uncertainty. while higher price/fair value Economic Moat C O M PE T I T I V E F O R C E S WIDE Moat Sources: Intangible Assets NARROW NONE Switching Costs COMPANY PROFITABILITY Network Effect Cost Advantage © 2014 Morningstar. high. switching costs. we believe buying shares of superior businesses at a discount and allowing them to compound over time is the surest way to create wealth in the stock market. among others. but willingness to be contrarian is an important source of outperformance and a benefit of Morningstar’s independence. such as cash flow. The information contained herein is not represented or warranted to be accurate. Fundamental Economic Fair Value Moat Rating Estimate Analysis Uncertainty Assessment QQQQQ QQQQ QQQ QQ Q Star Rating Economic Moat The economic moat concept is a cornerstone of Morningstar’s investment philosophy and is used to distinguish high-quality companies with sustainable competitive advantages. To order reprints. very high. and stewardship. Uncertainty Rating The Morningstar Uncertainty Rating demonstrates our assessment of a firm’s cash flow predictability. economic cycles. or valuation risk. Our uncertainty ratings are low. See last page for important disclosures. network effect. complete.Morningstar Morningstar Equity Equity Analyst Analyst Report Report |Page 7 of 9 Morningstar Equity & Credit Research Methodology Fundamental Analysis At Morningstar. With each uncertainty rating is a corresponding set of price/fair value ratios that drive our recommendations: Lower price/fair value ratios (<1. call +1 312-696-6869. To license the research. We have identified five sources of economic moats: intangible assets. but the designation also directly contributes to our estimate of a company’s intrinsic value through sustained excess returns on invested capital. are our primary focus. Fair Value Estimate Our analyst-driven fair value estimate is based primarily on Morningstar’s proprietary three-stage discounted cash flow model. Without a moat. Redistribution is prohibited without written permission. Economic moats are not only an important sorting mechanism for quality in our framework. We also use a variety of supplementary fundamental methods to triangulate a company’s worth. this approach causes our recommendations to appear out of step with the market. This report is for information purposes only. you may use this report only in the country in which its original distributor is based. The long-term fundamentals of businesses. Unless otherwise provided in a separate agreement. competition. the higher its intrinsic value. An economic moat is a structural feature that allows a firm to sustain excess returns over a long period of time. All Rights Reserved. call +1 312-696-6100. medium. such as sum-of-the-parts. and yields. Data as originally reported.

Very high and extreme uncertainty companies tend to have higher risk and volatility. the fair value estimate for a firm is so unpredictable that a margin of safety cannot be properly estimated. Quantitative Uncertainty: This rating describes our level of uncertainty about the accuracy of our quantitative fair value estimate.75 155% 125% 95% QQ 135% 80% 125% 115% 110% 105% QQQ 90% 85% 80% 70% QQQQ 60% 0.50 50% QQQQQ 0. and should not be considered a solicitation to buy or sell any security. we produce Quantitative Ratings for a much larger universe of companies. The QFVE is displayed in the same currency as the company’s last close price. the quantitative model will have more trouble assigning correct ratings.25 1. These ratings are generated by statistical models that are meant to divine the relationships between Morningstar’s analyst-driven ratings and key financial data points.Morningstar Morningstar Equity Equity Analyst Analyst Report Report |Page 8 of 9 Morningstar Equity & Credit Research Methodology ratios (>1. the quantitative models incorporate new data efficiently and consistently. When the ratings differ. and follow the quantitative rating when a company has several reasonable comparable companies and relevant information is flowing at a rapid pace. This report is for information purposes only.00 Q 1. If a company is unique and has few comparable companies. Redistribution is prohibited without written permission.00 0. Data as originally reported.25 Low Uncertainty Rating Medium High Very High © 2014 Morningstar. All Rights Reserved. Understanding Differences Between Analyst and Quantitative Valuations If our analyst-driven ratings did not sometimes differ from our quantitative ratings. complete. In very rare cases. it may be wise to follow the analyst’s rating for a truly unique company with its own special situation. In this way. Consequently. call +1 312-696-6100. Quantitative Fair Value Estimate (QFVE): The QFVE is analogous to Morningstar’s fair value estimate for stocks. we find the ratings to be much more predictive than when they differ. See last page for important disclosures. Financial Health: Financial health is based on Morningstar’s proprietary Distance to Default calculation. It represents the per-share value of the equity of a company. while an analyst will have an easier time recognizing the true characteristics of the company. there would be little value in producing both. ? . When the analystdriven rating and the quantitative rating agree. we use a rating of extreme. To license the research. Unless otherwise provided in a separate agreement. we find quantitative ratings and analyst-driven ratings to be equally powerful predictors of future performance. Uncertainty Rating Price/Fair Value 2. Differences occur because our quantitative ratings are essentially a highly sophisticated analysis of the analyst-driven ratings of comparable companies. Quantitatively Driven Valuations To complement our analysts’ work. The higher the rating. For these firms. Valuation: The valuation is based on the ratio of a company’s quantitative fair value estimate to its last close price. the less likely we think the company is to default on these obligations. In this way it is analogous to Morningstar’s fair value uncertainty ratings. call +1 312-696-6869. The information contained herein is not represented or warranted to be accurate. To order reprints.50 1.0) lead to negative recommendations. you may use this report only in the country in which its original distributor is based. or timely. Empirically.75 175% 1. they provide an excellent second opinion for each other. Quantitative Economic Moat: The quantitative moat rating is analogous to Morningstar’s analyst-driven economic moat rating in that both are meant to describe the strength of a firm’s competitive position. our quantitative ratings are directly analogous to our analyst-driven ratings. Credit Rating The Morningstar Corporate Credit Rating measures the ability of a firm to satisfy its debt and debtlike obligations. On the other hand. correct.

Five-star stocks sell for the biggest risk-adjusted discount whereas one-star stocks trade at premiums to their intrinsic value. 3. Redistribution is prohibited without written permission.. To order reprints.morningstar.Morningstar Equity Analyst Report |Page 9 of 9 UltraTech Cement Ltd 532538 (XBOM) Morningstar Rating Last Price underreview 2. Further information on Morningstar’s methodology is available from http://global. This report is for information purposes only.37 660. The information contained herein is not represented or warranted to be accurate. four key components drive the Morningstar Rating: 1. including its global affiliates. © 2014 Morningstar. All Rights Reserved.19 Building Materials Standard 22 Oct 2014 22 Oct 2014 22 Oct 2014 © 2014 Morningstar.30 INR 23 Oct 2014 Fair Value Estimate Price/Fair Value Dividend Yield % Market Cap (Bil) Industry Stewardship 2400. Redistribution is prohibited without written permission. or timely. you may use this report only in the country in which its original distributor is based. bonus and in some cases restricted stock. Current market price. Estimate of the stock’s fair value. It has not been made available to the issuer prior to publication.. this report was prepared by the person(s) noted in their capacity as Equity Analysts employed by Morningstar.00 INR 1. The information contained herein is not represented or warranted to be accurate. No material interests are held by Morningstar or the Equity Analyst in the financial products that are the subject of the research reports or the product issuer. and should not be considered a solicitation to buy or sell any security. Further information on Morningstar’s conflict of interest policies is available from http://global. Unless otherwise provided in a separate agreement. correct. Assessment of the firm’s economic moat. It has not been determined in advance whether and in what intervals this document will be updated. Regarding Morningstar’s conflicts of interest: 1) Equity Analysts are required to comply with the CFA Institute’s Code of Ethics and Standards of Professional Conduct and 2) Equity Analysts’ compensation is derived from Morningstar’s overall earning and consists of salary. 2. This report is for information purposes only. Uncertainty around that fair value estimate and 4. ? .mor­ ningstar. complete. All Rights Reserved. and should not be considered a solicitation to buy or sell any security. call +1 312-696-6100. complete. or timely. Inc. The Morningstar Rating for stocks identifies stocks trading at a discount or premium to their intrinsic value.04 0. The original distributor of this document is Morningstar Inc. Based on a fundamentally focused methodology and a robust. standardized set of procedures and core valuation tools used by Morningstar’s Equity Analysts.406. Unless otherwise provided in a separate agreement.com/equitydisclosures. To license the research.com/equitydisclosures. however Equity Analysts are neither allowed to participate directly or try to influence Morningstar’s investment management group’s business arrangements nor allow employees from the investment management group to participate or influence the analysis or opinion prepared by them. you may use this report only in the country in which its original distributor is based. call +1 312-696-6869. Unless stated otherwise. correct. Data as originally reported.