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UltraTech Cement’s consolidated EBITDA stood flat YoY/declined 26% QoQ to Rs30.4bn, missing our/consensus estimates by 4%/11%, respectively, mainly due to one-time higher marketing spends which the management expects to normalize going forward. EBITDA/t declined 7% YoY/19% QoQ to Rs951 (Emkay est: Rs1,000). UltraTech is on track to achieve 200mt grey cement capacity (vs 146mt currently) by FY27E (~11% CAGR) at a capex of less than USD75/t. This, will help the company to achieve industry-leading volume growth, despite its large scale and the lower capex/t will boost return ratios. Besides, UltraTech’s Management is targeting sustainable cost reduction of ~Rs300/t by FY27E to de-risk its business. We factor-in consolidated volumes/EBITDA at 11%/18% CAGR over FY24-27E. Given its strong growth/capex plans, pan-India presence, and robust balance sheet, we increase our target EV/E multiple to 20x (vs earlier 18x) and revise our Jun25E TP to Rs12,800/share after the quarterly roll over.

Result summary

India operations EBITDA/t stood flat YoY/declined 26% QoQ to Rs965. Consolidated volumes increased 6.6% YoY/declined 9% YoY to 32mt. Although, grey cement realization declined 5.7% YoY/2.4% QoQ to Rs5,045. Company has added 8.7mt grey cement capacity in Q1FY25, taking its total grey cement capacity to 149.5mt. Other ongoing expansion projects and the merger of Kesoram Industries are on track. Upon completion of these projects, UTCEM’s total capacity will reach ~200mt by FY27E. Net debt increased Rs27bn QoQ to Rs55bn as of Jun-24.

What we liked: Industry-leading volume growth

What we did not like: Increase in net debt

Earnings call KTAs:

i) UltraTech expects double-digit volume growth vs industry growth of 7-8% in FY25; ii) Cement prices further declined 1.5% in Jul-24 vs avg. of Q1FY25, and Company expects it to improve after monsoons; iii) Targets Rs300/t (earlier Rs200-300/t) sustainable cost reduction by FY27 by: increased share of green power, increase in blending ratio, reduction in lead distance, better operating leverage etc.; iv) UltraTech incurred capex of Rs20bn in Q1FY25, and expects to incur capex of Rs85-90bn (vs earlier Rs95bn) for FY25; v) Recently, UltraTech approved acquisition of ~23% of the equity share capital of India Cements as a non-controlling financial investment; vi) UltraTech green power mix increased to 29% in Q1FY25 vs 25.7%/22% in Q4FY24/Q1FY24. The company expects it to increase to 40-45%/60%/85% by FY25/FY27/FY30; vii) Capacity utilization stood at 85% in Q1FY25 vs 98%/89% in Q4FY24/Q1FY24. Capacity utilization was better in South/West at 85-90%, North and Central stood at 82-85%; lowest capacity utilization was seen in East at 80%. Clinker utilization stood at 85-86% for Q1FY25; viii) Trade share stood at 68% in Q1FY25 vs 65%/68% in Q4FY24/Q1FY24; ix) Blended cement in Q1FY25 stood at 71% vs 69.2%/70% in Q4FY24/Q1FY24; x) Premium products contributed 24% of trade sales volume in Q1FY25 vs 23.9%/21.7% in Q4FY24/ Q1FY24

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