Ultra Tech

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.
OUltratechs 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, wont 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 Techs 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 Indias 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.
Ultratechs 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.
Ultratechs 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 Ultratechs 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 cements
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 Cements 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
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Morningstar Equity Analyst Report |Page 2 of 9

Morningstar Rating
Last Price

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
Close Competitors
Currency (Mil)
Market Cap
TTM Sales
Operating Margin
TTM/PE
Ambuja Cements Ltd 500425
INR
334,679
91,917
16.30
26.18
Holcim Ltd HOLN
CHF
21,341
19,131
11.88
17.95
HeidelbergCement AG HEI
EUR
10,080
14,067
11.72
14.37
the sector and the Indian economy resulted in pricing

pressure in some regional markets where excess capacity
was evident, including southern India. Even so, Ultratech
Cement has still managed to achieve returns on invested
capital (ROIC) that exceed its cost of capital (WACC).
Entry barriers in the cement industry stem from
manufacturing plants near raw material sources,
regulatory approval, capital intensity, and cements low
value-to-weight ratio. In India, any new entrant in the
cement industry faces obstacles that include high capital
costs, long gestation periods in seeking state or
government approvals for land, limestone reserve linkage,
coal supply linkage for captive power approval or power
supply from the state grid, and establishing a distribution
network. In our view, the acquisition of substantial land,
invariably, would require substantial government
assistance.
Due to the low value-to-weight ratio of raw materials and
finished products, freight costs figure heavily in overall
production costs. Ultratech Cements freight and
forwarding costs traditionally account for about one third
of the total operating costs. Relatively high shipping costs
for both raw materials and for the finished product tips
the scales in favor of regional producers.
Additionally, Indian markets work in the form of regional
clusters as south, west, east, central, and north India.
Each cluster has its own, unique price dynamics, with
cement produced in the south unlikely to get transported
to the west, and remain competitive. If local demand is
high enough to require costly imports, benefits accrue to
local producers because of their cost advantage. Domestic
regional producers, therefore, do not have to worry about
distant competitors depressing prices by shipping high
tonnages into the market.
Power or fuel costs are typically among cement
companies' top two operating costs. Ultratechs fully
integrated cement plants have their own captive thermal
power plants, with about 674 megawatts (MW) of power
capacity. Overall, about 80% of its fuel requirements are
fulfilled internally, which reduces costs and keeps margins

high. Thermal power plants are based on leased coal
mines provided by the government and in our view, will
continue to act as a differentiator for Ultratech, as smaller
players would find it difficult to invest in captive power
along with investment in new capacities in a rising energy
cost environment.
With its pan-India presence, Ultratech Cement is the
market leader by capacity. Its 30% market share in western
India reflects its strong presence in that market, with
potential to grow to about 38% by fiscal 2015 as it
completes consolidation of the Jaypee capacity. Ultratech
Cement holds about 13% to 15% market share in north,
central and eastern India, but has lower market share, at
about 9%, in the biggest market, south India, which
constitutes 40% of all of Indias capacity, and where more
than 30 companies compete in a highly fragmented
market.
Overall, Ultratech Cements geographic distribution reach
reduces its exposure to regional price variations. For
example, southern-based competitors, such as Ramco
Cement, are struggling with a 10% decline in cement
prices and rising costs in the fourth quarter of fiscal 2014,
while cement prices were moving 6% higher elsewhere
in the Indian market. The detrimental impact of this
scenario would be offset by better performance in another
region for a company with a geographically broad business
footprint, such as Ultratech.
In our view, the housing sector is cement's biggest demand
driver. Housing accounts for more than two thirds of India's
total cement consumption. Other major consumers of
cement include the infrastructure, commercial construction,
and industrial construction sectors.
Were upbeat on cement demand from the construction
industry over our forecast period. Indias per-capita cement
consumption remains subdued, currently averaging fewer
than 200 kilograms, versus 500 kilograms in the U.S. and
in other developed countries. This should grow over time,
owing to increased government expenditure on
infrastructure and housing, coupled with favorable
demographics, and rising per capita income.
Infrastructure will derive demand from the planned
government spending of USD 1 trillion over the 2012-17
time frame. The housing sector will drive cement demand

Morningstar Rating
Last Price

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
owing to the government initiatives for providing low

income housing in urban and rural areas. Meanwhile,
rising per capita income will continue to drive demand for
luxury housing. In the wake of May's general elections,
we believe India's new government will be able to
decisively implement the planned government spending
on the infrastructure and housing sectors.
the leading edge of these expectations. The higher growth

would be driven by capacity acquisition, increased
business activity and demand in sectors such as housing
and infrastructure. We have assumed an increase in the
utilization ratio to mid cycle 85% by 2024 from 77% in
2014. We see significant room for plant utilization to
improve during an economic recovery.
Recently, the Indian cement industry has witnessed

significant consolidation. The two largest cement groups
now control nearly one third of the total domestic capacity.
Consolidation has been concentrated more in the western
and eastern regions, as market leaders such as Ultratech
and Ambuja have led the way. In fiscal 2014, Jaypee
Cements, one of Indias top four cement manufacturers,
chose to exit western India by selling its entire capacity
to the market leader, Ultratech. This has helped Ultratech
strengthen its western India business. We believe the
Holicim-Lafarge merger would also help in keeping prices
stable in the Ultratechs other key markets - north and east
India. However, we don't think these advantages are
strong enough to be sustained over a 20-year horizon, so
we don't think Ultratech has a wide economic moat.
Operating margins during 2015-24 are projected at 17.3%,

consistent with the trailing three-year average of 16%.
However, we are forecasting margins to improve to 19.6%
in 2019 from 15% in 2014 as volume recovers. Margins
will benefit from the industrys inherent operating
leverage. We use a 13% cost of equity assumption and a
roughly 11.6% weighted average cost of capital
assumption. 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.
Valuation
Despite the diversification of its customer base across

India, Ultratechs business is primarily driven by
construction activity, which is highly dependent on
economic conditions. Construction activity consists of
infrastructure, commercial/nonresidential, and residential.
About 40% of the demand comes from rural housing, while
20% comes from urban housing, 20% from infrastructure,
and the balance from other commercial construction. The
strength of the housing construction market is a key risk
for this business. Therefore, broader commercial activity,
vacancy rates, and interest rates are key determinants and
risks to performance. Also, government budgets for
infrastructure spending remain a key driver and risk factor
to the segments performance.
We are increasing our fair value estimate to INR 2,400

per share from INR 2,319 per share due to the time value
of money since we last reviewed Ultratech. Recently,
Ultratech cement has experienced a cyclical downturn in
construction activity, driven by an economic slowdown
and deferral of infrastructure projects and high interest
rates. This has led to soft demand for cement, ready-mix
concrete, and aggregates in some regional markets in
India.
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. We
forecast compound annual revenue growth of 14% during
2015-24. This will be driven by an average volume growth
of 9% and price growth of 4%. We expect average annual
GDP growth over our forecast period to be about 6% for
the same period.
Indian cement growth typically tracks about 1.2 times GDP
growth, placing our average 9% projected growth rate in
Ultratechs cement production over the 2015-24 period on
Risk
Ultratechs fair value estimate carries a high uncertainty

rating.
Steep energy costs that cannot be recouped through

higher pricing are another threat. Fierce or irrational
competition in regional markets that leads to unfavorable
pricing also would compromise Ultratech Cements
profitability. As Ultratech acquires further capacity in a
high growth but consolidating industry environment, we
think the company faces risks in paying appropriate prices
for potential targets. Furthermore, with more than a
quarter of its loans denominated in foreign currency,
primarily the Japanese yen and the U.S. dollar, we think

Morningstar Rating
Last Price

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
the company faces a considerable degree of currency risk.

Political risk could manifest itself in the form of
nationalization of assets or price controls on cement and
building products. Finally, stringent environmental
regulations could impair Ultratech Cement's business, if
introduced.
Management
Piyush Jain 18 June 2014
We assign Ultratech a Standard stewardship rating.
We think management has done a good job managing the

business, particularly through slower markets. The
company has done a decent job growing, both organically
and through acquisitions. Furthermore, Ultratech
management has remained committed to returning capital
to shareholders through a dividend. However, we're not
impressed with the level of disclosure on its consolidated
operations on a quarterly basis, which makes it difficult
to track any short-term issues which could potentially
evolve into bigger challenges.
Kumar Mangalam Birla succeeded his father as chairman

in 1995. Over the years, Birla has transformed the group
from having less than 8 million tonnes of capacity to an
industry-leading behemoth, boasting more than 50 million
tonnes of capacity in 2014. This has come through both
greenfield and brownfield expansions, along with
acquisitions.
Significant moves during Birlas tenure at the helm
included a major cement acquisition in 2000, the purchase
of Larsen and Toubro's cement division, international
expansion during 2010-11 with the Star cement brand
creation and associated three million tonne capacity in
Middle East, and recently Jaypee Cements western India
capacity acquisition.
Ultratech has been able to integrate all of the expansions
seamlessly, with effective brand positioning. O.P.
Puranmalka, a chartered accountant, is the full-time
director of Ultratech Cement Ltd. He joined the company
as a trainee in 1976 and rose through the ranks over the
years. He is also the vice president of the Cement
Manufacturers Association in India. He leads the
Ultratech cement operations, and oversees its strategy,
expansions, and acquisitions.
The board of directors comprises 12 members, with one
full-time director, five nonexecutive directors, and six
independent directors. The chairman's annual compensation
stood at 1% of 2013's net income, which we think could
be slightly higher. Still, we're satisfied with the fees and
commission paid to its other directors.
In fiscal 2014, Ultratech raised its dividend payout to 11%
of net income. We expect it to remain closer to 10% in
the long run. We dont expect Ultratech to increase the
dividend payout ratio significantly, as it's more likely to
acquire business in India and outside India, in our view.

Morningstar Rating
Last Price

23 Oct 2014
22 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
Analyst Notes Archive

Ultratechs Second-Quarter Margins Swing Wider;
Fair Value Estimate Increases to INR 2,400
Ultra Techs 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.
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 Ultratechs 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
cements 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.
INR 59.9 billion, up 13.6% on the prior year but below our
estimates. Cement and aggregate volumes were 18.4%
up on the prior year, but this was partially offset by a 4%
fall in blended realisations. Low price levels in Southern
India, along with depressed demand owing to subdued
economic activity, were one of the key reasons for the fall
in realisations. This was further aggravated by the rise in
the freight and power expenses, reflecting stepwise
deregulation of fuel in India. Adjusted EBITDA margins fell
3.2% to 17.9%. Lower depreciation and higher other
income cushioned the fall in core margins as net profit
margin fell 1.6% to 11%. The first-quarter results affirm
our forecasts, but the market was expecting higher
profitability which had driven the stock ahead of its fair
valuation. We do not make any material change to our
five-year forecasts.
Our fair value estimate remains INR 2,319 per share.
Shares remain close to fairly valued. We maintain our
narrow moat rating on the company, which is underpinned
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 that
manufacturing plants require, capital intensity, 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.
All-India average cement prices have moved by about 9%
in June to INR 322 per bag from INR 297 per bag. Recent
price hikes will help improve the profitability of Ultratech's
operations in south and east India. Our five-year forecast
includes 10% compounded capacity addition buoyed by
both organic and inorganic expansions to achieve this
growth. Long-term demand for building materials remains
attractive as the Indian government pursues its spending
on infrastructure and housing.
Weak Realisations, 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
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
2,406.30
2,293.56
660.2
r Basic Materials
Building Materials
UltraTech Cement Ltd is a cement manufacturing company.

The Companys products include Ordinary Portland Cement,
Portland Blast Furnace Slag Cement, Portland Pozzalana
Cement, White Cement, Ready Mix Concrete, and other
building products.
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
3,380
2,704
Scores
Momentum:
Standard Deviation: 29.44
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
2,028
99
6
98
73
Quantitative Fair Value Estimate

1,352
1,635.00
Total Return
52-Wk
2,868.00
5-Yr
2,868.00
676
532538
r
699.80
IND
Undervalued
Fairly Valued
Overvalued
Valuation
Sector
Median
Country
Median
17.6
12.3
-946.9
0.51
3.3
2.2
0.81
15.4
11.5
7.9
15.8
2.01
1.0
0.9
0.86
16.6
18.4
7.4
12.7
1.25
1.0
0.8
Current 5-Yr Avg
Sector
Median
Country
Median
8.8
4.5
0.6
10.3
3.8
6.2
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
1.05
30.5
18.9
19.1
57.8
0.37
3.8
3.0
Profitability
Return on Equity %
Return on Assets %
Revenue/Employee (Mil)
16.9
19.5
10.0
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
0.6
543.4
1.4
0.2
0.5
559.1
1.9
0.2
0.7
1.9
0.4
2.0
0.4
1-Year
3-Year
5-Year
10-Year
1.3
-26.1
-17.7
12.5
12.3
23.2
15.8
18.7
17.3
14.5
17.1
29.6
26.3
16.0
0.5
12.5
16.6
25.8
23.8
Growth Per Share

Revenue %
Operating Income %
Earnings %
Dividends %
Book Value %
Stock Total Return %
18.9
6.0
7.8
24.0
71.5
53.2
-10.6
-28.8
37.0
39.8
0.55
12.3
1.9
0.52
23.3
2.3
0.40
22.6
2.8
0.51
18.1
2.3
0.37
30.5
3.0
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
71,751
7.7
136,912
90.8
192,357
40.5
211,561
10.0
214,437
1.4
221,802
3.4
17,113
25.9
10,968
20,471
19.6
13,611
32,310
57.8
24,033
37,772
16.9
26,777
28,576
-24.3
22,060
28,425
-0.5
21,667
Operating Income
% Change
Net Income
15,931
-2,754
13,177
18.4
19,983
-12,719
7,264
5.3
33,920
-34,034
-114
-0.1
36,379
-33,857
2,522
1.2
34,619
-23,213
11,405
5.3
34,619
-23,213
11,405
5.1
Operating Cash Flow

Capital Spending
Free Cash Flow
% Sales
87.95
11.9
105.82
61.37
-30.2
26.50
87.66
42.8
-0.42
97.66
11.4
9.20
80.42
-17.7
41.58
78.98
-1.8
41.57
5.00
371.69
124,487
6.00
390.90
274,042
6.00
470.20
274,065
8.00
558.31
274,180
9.00
627.13
274,358
9.00
626.87
274,358
26.6
13.6
15.3
0.89
1.8
17.8
9.1
10.0
0.91
2.0
20.4
10.3
12.5
0.83
1.9
19.0
9.8
12.7
0.78
1.9
13.6
7.1
10.3
0.69
1.9
9.8
Profitability
Return on Equity %
Return on Assets %
Net Margin %
Asset Turnover
Financial Leverage
54.5
23.9
16,071
49.6
15.0
55,409
0.2
16.8
48,433
84.9
17.9
51,691
83.0
13.3
60,208
82.8
12.8
Gross Margin %
Operating Margin %
Long-Term Debt
46,271
1.4
107,122
1.5
128,867
1.4
153,077
1.3
171,985
1.2
Quarterly Revenue & EPS

Revenue (Bil)
Jun
2014
53.0
2013
2012
2011
Earnings Per Share

2014
24.29
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
214.4
211.6
192.4
136.9
80.42
97.66
87.66
61.37
13.9
2012
2013
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.
2014
Morningstar
Morningstar Equity
Equity Analyst
Analyst Report
Report |Page 7 of 9
Morningstar Equity & Credit Research Methodology

Fundamental Analysis
At Morningstar, 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. The long-term fundamentals of businesses, such as cash flow, competition, economic cycles, and stewardship, are our primary focus. Occasionally, this approach causes our recommendations to
appear out of step with the market, but willingness to
be contrarian is an important source of outperformance and a benefit of Morningstars independence.
Our analysts conduct primary research to inform our
views on each firms moat, fair value and uncertainty.
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 Morningstars investment philosophy and is used to distinguish high-quality companies with sustainable competitive advantages. An economic moat is a structural
feature that allows a firm to sustain excess returns
over a long period of time. Without a moat, a companys profits are more susceptible to competition. 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. The longer a firm generates economic profits,
the higher its intrinsic value. We believe lower-quality
no-moat companies will see their returns gravitate to-
ward the firms cost of capital more quickly than companies with moats will. We have identified five sources of
economic moats: intangible assets, switching costs,
network effect, cost advantage, and efficient scale.
Fair Value Estimate

Our analyst-driven fair value estimate is based primarily on Morningstars proprietary three-stage discounted
cash flow model. We also use a variety of supplementary fundamental methods to triangulate a companys
worth, such as sum-of-the-parts, multiples, and yields,
among others. Were looking well beyond next quarter
to determine the cash-generating ability of a companys
assets because we believe the market price of a security will migrate toward the firms intrinsic value over
time. Economic moats are not only an important sorting
mechanism for quality in our framework, but the designation also directly contributes to our estimate of a
companys intrinsic value through sustained excess returns on invested capital.
Uncertainty Rating
The Morningstar Uncertainty Rating demonstrates our
assessment of a firms cash flow predictability, or valuation risk. From this rating, we determine appropriate
margins of safety: The higher the uncertainty, the wider
the margin of safety around our fair value estimate before our recommendations are triggered. Our uncertainty ratings are low, medium, high, very high, and extreme. With each uncertainty rating is a corresponding
set of price/fair value ratios that drive our recommendations: Lower price/fair value ratios (<1.0) lead to positive recommendations, 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
Efficient
Scale
Morningstar
Morningstar Equity
Equity Analyst
Analyst Report
Report |Page 8 of 9
Morningstar Equity & Credit Research Methodology

ratios (>1.0) lead to negative recommendations. In very
rare cases, the fair value estimate for a firm is so unpredictable that a margin of safety cannot be properly
estimated. For these firms, we use a rating of extreme.
Very high and extreme uncertainty companies tend to
have higher risk and volatility.
Quantitative Economic Moat: The quantitative moat

rating is analogous to Morningstars analyst-driven
economic moat rating in that both are meant to describe the strength of a firms competitive position.
Financial Health: Financial health is based on Morningstars proprietary Distance to Default calculation.
Credit Rating
The Morningstar Corporate Credit Rating measures the
ability of a firm to satisfy its debt and debtlike obligations. The higher the rating, the less likely we think the
company is to default on these obligations.
Quantitatively Driven Valuations

To complement our analysts work, we produce Quantitative Ratings for a much larger universe of companies.
These ratings are generated by statistical models that
are meant to divine the relationships between Morningstars analyst-driven ratings and key financial data
points. Consequently, our quantitative ratings are directly analogous to our analyst-driven ratings.
Quantitative Fair Value Estimate (QFVE): The QFVE is
analogous to Morningstars fair value estimate for
stocks. It represents the per-share value of the equity
of a company. The QFVE is displayed in the same currency as the companys last close price.
Valuation: The valuation is based on the ratio of a companys quantitative fair value estimate to its last close price.
Quantitative Uncertainty: This rating describes our level of uncertainty about the accuracy of our quantitative
fair value estimate. In this way it is analogous to Morningstars fair value uncertainty ratings.
Understanding Differences Between Analyst

and Quantitative Valuations
If our analyst-driven ratings did not sometimes differ
from our quantitative ratings, there would be little value in producing both. Differences occur because our
quantitative ratings are essentially a highly sophisticated analysis of the analyst-driven ratings of comparable companies. If a company is unique and has few
comparable companies, the quantitative model will
have more trouble assigning correct ratings, while an
analyst will have an easier time recognizing the true
characteristics of the company. On the other hand, the
quantitative models incorporate new data efficiently
and consistently. Empirically, we find quantitative ratings and analyst-driven ratings to be equally powerful
predictors of future performance. When the analystdriven rating and the quantitative rating agree, we find
the ratings to be much more predictive than when they
differ. In this way, they provide an excellent second
opinion for each other. When the ratings differ, it may
be wise to follow the analysts rating for a truly unique
company with its own special situation, and follow the
quantitative rating when a company has several reasonable comparable companies and relevant information is flowing at a rapid pace.
Uncertainty Rating
Price/Fair Value
2.00
Q
1.75
175%
1.50
1.25
1.00
0.75
155%
125%
95%
QQ
135%
80%
125%
115%
110%
105%
QQQ
90%
85%
80%
70%
QQQQ
60%
0.50
50%
QQQQQ
0.25
Low
Uncertainty Rating
Medium
High
Very High

Morningstar Rating
Last Price

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
2014 Morningstar. All Rights Reserved. Unless stated

otherwise, this report was prepared by the person(s)
noted in their capacity as Equity Analysts employed by
Morningstar, Inc., including its global affiliates. It has
not been made available to the issuer prior to
publication.
The Morningstar Rating for stocks identifies stocks
trading at a discount or premium to their intrinsic value.
Five-star stocks sell for the biggest risk-adjusted
discount whereas one-star stocks trade at premiums to
their intrinsic value. Based on a fundamentally focused
methodology and a robust, standardized set of
procedures and core valuation tools used by
Morningstars Equity Analysts, four key components
drive the Morningstar Rating: 1. Assessment of the
firms economic moat, 2. Estimate of the stocks fair
value, 3. Uncertainty around that fair value estimate
and 4. Current market price. Further information on
Morningstars methodology is available from
http://global.morningstar.com/equitydisclosures.
It has not been determined in advance whether and in
what intervals this document will be updated. 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. Regarding
Morningstars conflicts of interest: 1) Equity Analysts
are required to comply with the CFA Institutes Code of

Ethics and Standards of Professional Conduct and 2)
Equity Analysts compensation is derived from
Morningstars overall earning and consists of salary,
bonus and in some cases restricted stock; however
Equity Analysts are neither allowed to participate
directly or try to influence Morningstars investment
management groups business arrangements nor allow
employees from the investment management group to
participate or influence the analysis or opinion prepared
by them. Further information on Morningstars conflict
of interest policies is available from http://global.mor
ningstar.com/equitydisclosures.
Unless otherwise provided in a separate agreement,
you may use this report only in the country in which its
original distributor is based. The original distributor of
this document is Morningstar Inc.. 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.
written permission. To order reprints, call +1 312-696-6100. To license the research, call +1 312-696-6869.

Ultra Tech

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

UltraTech Cement Ltd 532538 (XBOM)

underreview 2,406.30 INR

Fair Value Estimate

Market Cap (Bil)

Source: Morningstar Equity Research

Price/Quant Fair Value

Narrow moat-rated Ultratech will lead the industry's consolidation.

Ultra Techs second-quarter adjusted EBITDA shot up by

Ultratech is Indias largest producer of cement and

We are increasing our fair value to INR 2,400 from INR

Ultratech Cements narrow economic moat is attributable

Morningstar Equity Analyst Report |Page 2 of 9

UltraTech Cement Ltd 532538 (XBOM)

underreview 2,406.30 INR

Fair Value Estimate

Market Cap (Bil)

Ambuja Cements Ltd 500425

Holcim Ltd HOLN

the sector and the Indian economy resulted in pricing

fulfilled internally, which reduces costs and keeps margins

Morningstar Equity Analyst Report |Page 3 of 9

UltraTech Cement Ltd 532538 (XBOM)

underreview 2,406.30 INR

Fair Value Estimate

Market Cap (Bil)

owing to the government initiatives for providing low

the leading edge of these expectations. The higher growth

Recently, the Indian cement industry has witnessed

Operating margins during 2015-24 are projected at 17.3%,

Despite the diversification of its customer base across

Piyush Jain 23 October 2014

We are increasing our fair value estimate to INR 2,400

Ultratechs fair value estimate carries a high uncertainty

Steep energy costs that cannot be recouped through

Morningstar Equity Analyst Report |Page 4 of 9

UltraTech Cement Ltd 532538 (XBOM)

underreview 2,406.30 INR

Fair Value Estimate

Market Cap (Bil)

the company faces a considerable degree of currency risk.

We assign Ultratech a Standard stewardship rating.

We think management has done a good job managing the

Kumar Mangalam Birla succeeded his father as chairman

Morningstar Equity Analyst Report |Page 5 of 9

UltraTech Cement Ltd 532538 (XBOM)

underreview 2,406.30 INR

Fair Value Estimate

Market Cap (Bil)

Analyst Notes Archive

Ultra Techs second-quarter adjusted EBITDA shot up by

Weak Realisations, Higher Fuel and Power

Ultratech's fiscal 2015 first-quarter net sales came in at

UltraTech Cement Ltd 532538

Quantitative Fair Value Estimate

Market Cap (Bil)

UltraTech Cement Ltd is a cement manufacturing company.

Price Versus Quantitative Fair Value

Standard Deviation: 29.44

All Rel Sector Rel Country

Quantitative Fair Value Estimate

Current 5-Yr Avg

Current 5-Yr Avg

Price/Quant Fair Value