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Weak realization leads to EBITDA miss

Expect double-digit volume growth in FY25 vs. ~7-8% for the industry

* UTCEM’s 1QFY25 EBITDA was flat YoY at INR30.4b (6% below our estimate). EBITDA/t declined 7% YoY to INR951 (est. INR1,061). OPM declined 40bp YoY to 16.8% (est. ~18%). Adj. PAT stood at INR16.7b (est. INR15.5b), aided by a lower effective tax rate.

* The management highlighted that rural volumes for UTCEM grew ~9% YoY in 1Q, while there was lower demand from the infrastructure segment. Volume growth should be in double digits in FY25E vs. 7-8% for the Industry. The cost reduction target now stands at INR300/t for the next three years vs. earlier guidance of INR200-300/t. UTCEM will expand its capacity by 16mtpa, representing ~40% of the total industry capacity addition in FY25E.

* We cut our EBITDA/EPS estimates by 6%/7% for FY25 and 2%/3% for FY26 and FY27 each. The stock trades at 18x FY26E EV/EBITDA. We value UTCEM at 20x Jun’26E EV/EBITDA and arrive at TP of INR13,000. Maintain BUY. Sales volume rises 7% YoY; realization/t down 4% YoY (2% miss)

* UTCEM’s consol. revenue/EBITDA/adj. PAT stood at INR180.7b/INR30.4b/ INR16.7b (up 2%/flat/down 1% YoY and in line/down 6%/up 7% vs. our estimates). Consolidated sales volume grew 7% YoY to 32.0mt. Revenue of RMC grew 20% YoY, while white cement revenue declined 1%. Other operating income/t was INR64 vs. INR75/INR104 in 1Q/4QFY24.

* Grey cement realization was down 5.7% YoY/2.6% QoQ (~1% miss). Blended realization declined 4% YoY (~2% miss). Opex/t was down 4% YoY (in line), led by an 8%/4% decline in variable/freight costs. Other expense/t was up 9% (partly due to one-time brand building expenses). EBITDA/t declined 7% YoY to INR951 and OPM dipped 40bp to 16.8% in 1QFY24. Depreciation/ interest expenses rose 12%/21% YoY and other income declined 5% YoY.

Highlights from the management commentary

* UTCEM expects industry volume growth of 3-3.5% YoY in 1QFY25. Cement prices in Jul’25 are further down 1.5% from the 1QFY25 average. Price improvement, if any, is expected only in 2HFY25.

* 23MW of WHRS capacity was added in 1Q, taking the total capacity to 301MW. Green energy contributed 29.4% of power requirements in 1Q.

* Capex in 1Q was INR20b and will be at INR80-90b in FY25. Capex in FY26/FY27 will also be in the similar range. The company commissioned two integrated units in 1Q and each unit has clinker capacity of 3.5mtpa.

Valuation and view

* UTCEM’s 1Q operating performance was below our estimates mainly due to weak realization. Volume growth and cost reduction came in line with our estimates. Pricing pressure is estimated to continue in the near term; however, demand will stay healthy.

* We estimate a CAGR of 17%/20% in consolidated EBITDA/adjusted PAT over FY24-27. UTCEM is estimated to continue to gain market share with its robust capacity expansion. We value the stock at 20x Jun’26E EV/EBITDA to arrive at our TP of INR13,000. We reiterate our BUY rating.

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