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Volume growth hits speed breaker

Performance largely in line
UltraTech Cement’s (UTCEM IN) Q3FY24 operating performance was
broadly in line with our and Consensus estimates. Consolidated net
sales rose ~8% YoY/5% QoQ to ~INR 165bn. EBITDA was up ~39%
YoY/28% QoQ to INR 32.5bn. Reported PAT surged ~68% YoY/39%
QoQ to ~INR 18bn.

EBITDA per tonne rose ~32% YoY and ~25% QoQ

Consolidated sales volume growth moderated to ~6% YoY (versus
~20%/15% in Q1/Q2) and ~2% QoQ to ~27.3mn tonnes due to festivals,
cyclone in South India, pollution curb in North India and state elections.
Realization grew ~2% YoY/QoQ each to INR 6,035/tonne. Operating cost
dipped ~3% YoY/2% QoQ to INR 4,936/tonne, led by lower lead distance,
fall in fuel prices and operating leverage benefit. Thus, EBITDA/tonne, with
other operating revenue, jumped ~32% YoY/25% QoQ to INR 1,191.

India capacity to reach ~190mn tonnes by FY27

Ongoing capex work in phase II expansion of 24.4mn tonnes is on track
and may be completed in a phased manner by FY25. Apart from that,
UTCEM announced phase III expansion of ~22mn tonnes in Q3FY24,
which may be completed gradually by FY27. Further, in Q3, UTCEM
announced the acquisition of Kesoram Industries (KSI IN) and Burnpur
Cement (BPUR IN), with capacities of 10.75mn tonnes and 0.54mn
tonnes, respectively. Post completion of these projects, UTCEM’s India
capacity will increase to ~190mn tonnes.

Valuation: reiterate Accumulate with a higher TP of INR 10,659

We cut FY24E/25E/FY26E EPS by ~9%/7%/1% respectively. The earnings
downgrade is primarily due to demand softness in Q3FY24 and
incorporation of KSI’s financials. But we remain positive on the stock, long
term, and view continued focus on capacity addition to bode well for
UTCEM’s future growth prospects, enabling it to reach its target of 200mn
tonnes capacity.

Also, access to low-cost renewable power capacity and other cost savings
measures bode well for future earnings. We reiterate Accumulate and
raise our target multiple to 18x from 15.5x as visibility on meeting capacity
target of 200mn tonnes has increased. Also, we roll over to December
2025E from September 2025E, with higher TP of INR 10,659 from INR
9,098 on 18x December 2025E EV/EBITDA.

Please refer disclaimer at Report
SEBI Registration number is INH000000933