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UltraTech Cement’s consolidated EBITDA declined ~2% YoY/8% QoQ to Rs30.5bn in Q1FY24, coming in 8% below our estimates owing to higher than expected costs. Blended EBITDA/ton fell 18% YoY/3% QoQ to Rs1,018 (Emkay: Rs1,100). UltraTech is in the process of adding 4mt capacity in FY24 through debottlenecking and another 22.6mt capacity (under phase-II) by FY25/26 (vs current capacity of 131mt). Management expects cement prices to improve post the monsoons and input cost deflation to kick-in in coming quarters. We largely maintain our FY24-25 estimates. Given the company’s strong growth/capex plans, pan-India presence, focus on cost efficiencies and strong balance sheet, we raise our target EV/E to 16x (earlier 15x). We maintain BUY on the stock, with revised Jun-24E TP of Rs9,250/share, post the quarterly roll-over.

Result Summary

UltraTech’s consolidated volume grew 20% YoY to 30mt, while blended realization declined 2.4% YoY/increased 0.7% QoQ to Rs5,847. Company’s India operations’ EBITDA remained flat YoY/declined 7% QoQ to Rs30bn, with EBITDA/ton at Rs1,034. Total cost/ton increased ~2% YoY/1% QoQ to Rs4,903 (Emkay: Rs4,732). Consolidated PAT increased 6% YoY/1% QoQ to Rs16.8bn. Net debt declined by Rs2.3bn to Rs27bn, as of Jun-23.

What we liked: Industry-leading volume growth; decline in net debt

What we did not like: Higher than expected cost

Earnings-call KTAs:

1) Management expects demand growth to clock in double digits in FY24. 2) UltraTech maintained its FY24 capex guidance of Rs65-70bn. 3) Company has completed its phase1 project by commissioning 4.3mt cement capacity in YTD-FY24, improving its domestic grey-cement capacity to ~131mt. Besides, UltraTech is in the process of adding 4mt capacity (primarily GUs) in FY24 through debottlenecking, with another 22.6mt capacity in phase-2 to be added by FY25/26. Additionally, Company is likely to announce the next phase of growth expansion in a couple of quarters. 4) Cement prices saw a marginal uptick in the North and West. Management expects cement prices to improve post the monsoon season. 5) Average fuel cost stood at Rs2.34/Kcal in Q1FY24 vs Rs2.5/Kcal in Q4FY23. Management expects benefits from input cost deflation to kick-in in coming quarters. 6) Clinker-to-Cement (CC) ratio improved by 0.04x YoY to 1.44x in Q1FY24. 7) Fuel mix for the quarter: imported coal at 46%, domestic coal at 7%, petcoke at 42%, and AFR at 5%. 8) Blended cement stood at 70%; trade sales stood at 68%; and premium products stood at ~22% of trade sales, in Q1FY24.

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