Buy UltraTech Cement Ltd For Target Rs 13,000 By Emkay Global Financial Services Ltd
UltraTech Cement (UTCEM) reported consolidated EBITDA of Rs56bn (up 21%/43% YoY/QoQ), largely in line with our estimate. Growth in domestic grey cement (9.3%) outpaced industry growth (~7%), implying continued market gains. The management maintains its stance on seeing better-thanindustry growth in FY27 too. Despite the ~Rs50/t cost impact due to the USIran conflict, total unit operating cost was flat YoY and down 2% sequentially. We believe such cost discipline is primarily emanating from the swift ramp-up of acquired assets. A better pricing environment in the non-trade segment and full brand transition of acquired assets aided improvement in grey cement realisation by ~2.5% QoQ; consequently, EBITDA/t stood at Rs1,253 (Emkay: Rs1,157) vs Rs1,126 in Q4FY25 and Rs1,007 in Q3FY26. On capacity expansion, UTCEM holds steadfast focus to achieve >240mtpa by FY28. We believe it offers a safe zone amid the current volatile situation and remains a best play on India’s infrastructure story. UTCEM remains our top pick, and we continue to repose faith in its ability to deliver cost savings and consolidate/strengthened its pole market-share position. We raise FY27E EBITDA by ~11%, factoring in the balanced guidance on cost, volume, etc, while broadly maintaining our FY28 estimates. We continue to value UTCEM at 18x Mar-28E EV/EBITDA with unchanged TP of Rs 13,000; maintain BUY.
Ticking all boxes
UTCEM’s consolidated revenue grew ~12%/18% YoY/QoQ, powered by growth of 9%/15% YoY/QoQ in volume and 2.6% (each on YoY and QoQ basis) in blended realization. Swift ramp-up in acquired entities and operating leverage benefits (its highest-ever sales volume) ensured total operating costs remain under control despite the Rs50/t cost inflation owing to packaging bags and currency fluctuations. EBITDA grew ~21%/43% YoY/QoQ to Rs56bn (all-time high), in line with our estimate (~Rs54bn). The management will mitigate the higher fuel costs (owing to the ME conflict) in ensuing quarters, through multiple procurement sources, entering long-term agreements, and consumption of low-cost inventory. Further, enthused by the strong Q4 results and surpassing the 200mtpa capacity mark, the management announced a special dividend of Rs240/sh (~2% dividend yield). PAT stood at Rs30bn, higher by 21% YoY.
Marching toward the 240mtpa capacity-mark, with stronger balance sheet
UTCEM maintains focus on achieving 240mtpa capacity by FY28 (~200mtpa now). We estimate ~Rs185bn capex cash outflow over FY27-28. Given the robust operating cashflow (adjusted post-interest expense and dividend payouts) of ~Rs220bn over FY27-28E, we believe UTCEM is unlikely to meet any hurdle in funding such a capex plan via internal accruals. We maintain a positive stance on UTCEM, led by its commitment to deliver operational cost savings of >Rs300/t and a visible turnaround in acquired entities.
For More Emkay Global Financial Services Ltd Disclaimer http://www.emkayglobal.com/Uploads/disclaimer.pdf & SEBI Registration number is INH000000354
