Ultratech Cem: Need To Stay Abv 2875-2930 For Further Strength

For Ultratech, only consecutive closing above 2875-2930, expect 3300-3400;

 Otherwise, it will be weak and sustaining below 2745-2660 zone, 

may fall up to 2580-2385

Recent cement deal with JP for Rs.16500 cr may face various regulatory hurdle

And may also be EPS dilutive in the initial years 

due to interest pay out for the assumed debt 

Actual consolidated TTM EPS is at 80.94 

and present PE of around 34 may be bit expensive;

Whereas 25 may be a ideal PE for the cement industry 
under the current market scenario

Trading Idea:

CMP: 2769

Sell either below 2745 or on rise around 2850-2875-2905;

TGT1: 2660-2580*-2460-2385 (1-3M)

TGT2: 2320-2275-2195-1950 (12-24M)

TSL> 2930

Note: Consecutive closing (3 days) above 2930 zone, Ultratech may rally up to 3015-3105-3145 & 3200-3255 and 3280/3300-3400 in the short/mid to long term (alternative bullish case scenario).

Although cement & steel industry apparently benefited form the yesterday's (2016) "Rural" budget due to some infra push, but lots will depend up on the actual implementation and its effect of the earnings on the beneficiary companies.

The 2016 budget may be termed as "Political" budget aimed at wooing the rural voters in the series of forthcoming state elections and even eyeing the groundwork for the 2019 parliament election.

The only positive & surprising thing is the FRBM roadmap & reported fiscal deficit figure amid projected unrealistic tax & telecom spectrum revenue expectations. As balance sheet of telecos are already stretched quite significantly and PSBS may be not in a position to fund those ambitious telecom spectrum auction target (around Rs.92000 cr), it may be quite difficult for the Govt to meet the revenue target.

The only immediate driver for the market may be the expected rate cut (0.25-0.50) by the RBI in the near future (another Holi Gift to the nation ?). But given the current tepid sentiment of the global as well as the local market, it is very doubtful, how its going to help our market significantly. Also there will be question of proper transmissions by the banks as only 60% of previous rate cut actually transmitted to the borrowing consumers/economy.

In the present scenario, 7000 may be the new normal of the Nifty (6300-7000-7700) in the near term.

As par BG metrics & current market scenario:

(based on actual TTM & projected FWD EPS with average PE of 25)

Current median valuation of Ultratech may be around: 2390 (FY:15/TTM)

Projected fair valuations might be around: 2335-2470-2650 (FY:16-18/FWD)

SCRIP	EPS(TTM)	BV(Act)	P/E(AVG)	Low	High	Median	200-DEMA	10-DEMA
ULTRACEMCO	80.94	693.85	25	2390.17	2382.30	2386.23	2823.29	2804.71

ULTRACEMCO

77.25

766.7

25

2335.05

2327.36

2331.21

2823.29

2804.71

ULTRACEMCO

86.44

847.25

25

2470.05

2461.91

2465.98

2823.29

2804.71

ULTRACEMCO

99.45

936.15

25

2649.42

2640.68

2645.05

2823.29

2804.71

Analytical Charts: