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UltraTech’s consolidated EBITDA increased 8% YoY/42% QoQ to Rs33.2bn in Q4FY23, coming in line with consensus and our estimates. Blended EBITDA/ton fell 6% YoY/increased 15% QoQ to Rs1,047. Company has almost completed its Phase-1 projects by commissioning 17.8mt (of the ~20mt), taking its domestic grey-cement capacity to ~129mt by Apr-23. Management reiterated its target to reach 154mt by FY25/26E by commissioning 22.6mt under Phase-II which should propel volume growth and marketshare gains. Management expects cement prices to remain stable in the near term, but benefits from input cost deflation would kick-in in coming quarters. Net debt declined Rs12bn YoY to Rs27bn, as of Mar-23. Factoring-in the higher volume growth, we have increased our FY24-25E EBITDA by 2%. Given the company’s strong growth/capex plans, extensive pan-India presence, premium brand positioning, and focus on cost efficiencies, we have raised our target EV/E to 15x (earlier, 13x), in line with the past 5-year average. We maintain BUY on the stock, with revised Mar-24E TP of Rs8,500/share.

Results summary: UltraTech’s consolidated volume grew by 15% YoY to 31.7mt, while blended realization increased 3% YoY/declined 2% QoQ to Rs5,808. India operations’ EBITDA increased 7% YoY/ 44% QoQ to Rs32.3bn, with EBITDA/ton at Rs1,063. Clinker capacity utilization stood at 91%/ 83%; while cement capacity utilization stood at 95%/ 84% in Q4FY23/FY23, respectively. Total cost/ton increased by 5% YoY/declined 5% QoQ to Rs4,833 (Emkay est: Rs4,887). Consolidated PAT increased ~13% YoY/57% QoQ to Rs16.6bn. In FY23, UltraTech generated FCF of Rs23.5bn, post working-capital blockage of Rs3.3bn and capex spend of Rs61bn. Following the dividend payment of Rs11bn, net debt declined by Rs12bn YoY/Rs50bn QoQ to Rs27bn, as of Mar-23.

What we liked: Double-digit volume growth; robust demand outlook;

BS deleveraging What we did not like: Stable pricing outlook

Earnings-call KTAs: 1) UltraTech has witnessed strong demand, with the momentum continuing in Apr-23. Management expects industry demand growth of 7-8% in FY24. 2) Clinker-to-Cement (CC) ratio stood at 1.42x in Q4 vs 1.41x in Q3 which company targets increasing to 1.5x in coming years. 3) Prices remain broadly stable on MoM basis in Apr-23. 4) Fuel consumption cost stood at Rs2.5/Kcal in Q4 vs Rs2.6/Kcal in Q3. Management expects fuel cost to soften in coming quarters; however, it remains cautious on price volatility. Fuel consumption cost stood at USD194/ton in Q4 vs USD200/ton in Q3. 5) UltraTech has incurred capex of Rs62bn in FY23 and maintains capex guidance of ~Rs60-70bn each for FY24/FY25. Total capex outlay for phase II expansion stands at Rs126bn, which will be spent in a phased manner. 6) UltraTech has commissioned 43MW WHRS capacity in FY23, increasing its total capacity to 210MW (~15% of power requirements) and targets increasing this to 300MW by Mar-24. 7) The Company has commissioned 12.4mt grey cement capacity in FY23 and an additional 2.2mt brownfield capacity in Apr-23. Phase I expansion is on the verge of completion, with the remaining 2.1mt capacity to commission in Q1FY24. The second phase of expansion (22.6mt) has already started, with civil work in full swing at most sites. Commercial production from the second phase of expansion is expected to go on stream in a phased manner by FY25/26. Company’s next phase of expansion (besides the ongoing 22.6mt) is likely to be shared in coming quarters.

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