UltraTech Cement's (UTCEM) Q1FY12 results were significantly ahead of our estimates as better realisations and lower overhead costs aided profit growth. Blended realisations grew 5.5% sequentially to Rs4.4k/mt and were 3% above estimates. Net sales on a proforma basis grew 9.5% YoY to Rs44bn. EBITDA margins expanded 400bps sequentially on reduction in employee and other expenditure. On a proforma basis net profits were up 22.5% YoY to Rs6.8bn as against our estimate of Rs4.6bn.

Marginal decline in volumes: Adjusting for the merger of Samruddhi Cement, cement volumes were down 2.3% YoY to 9.6mn mt. Clinker dispatches halved to 0.24mn mt. While volumes in Northern and Western regions were flat, Central and Southern region volumes declined 22.6% and 8.8% respectively. White cement and putty volumes were flat at 195k mt. Blended realisations were higher by 5.5% QoQ at Rs4.4k/mt. With better than expected realisations net sales were 4.5% higher than expectation at Rs44bn.

Margins surprise: The company was able to counter the effect of higher fuel cost through better realisations and reduced overheads. Fuel costs/mt jumped 17.1% QoQ due to 30% increase in prices of domestic coal. This was countered by 15% and 18% reduction in employee costs and other expenditure respectively. As a result margins expanded 220bps YoY (400 bps QoQ) to 27.9% as against our estimate of 21.7%. The company reported its second highest ever EBITDA/mt of Rs1,245.

Capex plan: The company is on track on its capex plan of Rs110bn to add a capacity of 9.2mn mt in Chhattisgarh and Karnataka over the next three years.

Outlook: The Q1FY12 results have been significantly better than estimates, especially on the margin front. We await further details and would be revisiting our estimates post the concall. Meanwhile, we maintain our earnings estimate for FY12 and FY13 at Rs70.7 and Rs94.5 respectively.

Outlook: The Q1FY12 results have been significantly better than estimates, especially on the margin front. We await further details and would be revisiting our estimates post the concall. Meanwhile, we maintain our earnings estimate for FY12 and FY13 at Rs70.7 and Rs94.5 respectively.