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In-line quarter; market share gains to continue

UltraTech Cement’s consolidated EBITDA declined 11% YoY/ increased 43% QoQ to INR 28.9bn, in line with our estimates and ~3% above consensus estimates. Blended EBITDA/tn fell 20% YoY/ 31% QoQ to INR 951. UltraTech aims to add ~68mt to India’s grey cement capacity (vs. 141mt capacity as of Mar’24) by FY27E (14% CAGR). This will enable it to post industry leading volume growth, going forward, despite large scale. Directionally, it plans to achieve >200mt by FY27E through organic/ inorganic expansion as it intends to gain capacity market share (~450bps increase in share, to 27% by FY27E) which will be supported by the balance sheet. It has enough levers for structural cost improvement of INR 200-300/tn over the next 3 years. This will help it to either increase market share further or achieve industry leading profitability. We believe UltraTech is poised for structural improvement in return ratios over the next 3-4 years owing to i) rising asset turnover; ii) low cost of expansions; and iii) improving profitability. We broadly maintain our FY25E-27E estimates with unchanged Mar’26E TP of INR 13,000 based on 19x FY27E EV/E. UltraTech is our top pick in the sector.

* Result summary: UltraTech’s consolidated volume grew by 11% YoY / 9% QoQ to 30.4 mt, while blended realisation declined 7.4% YoY/ 1.6% QoQ to INR 5,588 (JMFe: INR 5,591). Grey cement realisation fell 9.6% YoY/ rose 1.4% QoQ to INR 4,970. Capacity utilisation declined 400bps YoY (+400bps QoQ) to 73% in 3QFY25. Total cost/tn fell 5% YoY/ 4% QoQ to INR 4,711. Consolidated PAT declined 17% YoY/ increased 79% QoQ to INR 14.7bn. India operations EBITDA fell 12% YoY/ rose 44% QoQ to INR 27.8bn with blended EBITDA/tn at INR 964. Consolidated net debt increased by INR 74bn QoQ to ~INR 162bn as of Dec’24, including funds earmarked for open offer of India Cements.

* What we liked: Market share gains; robust demand outlook

* What we did not like: Increase in net debt

? Earnings Call KTAs: 1) The management highlighted that North and West saw best realisation improvement with +3% price rise in 3Q;

2) West and Central witnessed 1.5% price hike MoM in Jan’25;

3) UltraTech has purchased 8.42% stake of On Star cement for INR 7.8bn, which will help it to understand the North East market and eventually progress;

4) On India Cements (ICEM) – in which UltraTech holds ~81% stake post the open offer – the company highlighted that it is likely to take ~12 months to lift ICEM plants’ production efficiencies nearer to that of UltraTech’s plants. The management is likely to provide more details in the coming quarter. Besides, the company may look to gradually bring down its stake to 75% to follow compliance requirements;

5) The acquisition cost for acquiring ICEM is USD 98/tn;

6) There is around INR 20-25/bag price gap between UltraTech and ICEM’s brands. The company is targeting to narrow this gap gradually with branding initiatives It is looking to consolidate Kesoram’s operations by Mar’25; it also highlighted 4-5% potential improvement in Kesoram’s utilisation level along with opportunities to improve realisation and cost structure;

6) The management has guided organic capex of INR 80bn-90bn / 90bn / 60bn-70bn (excluding capex requirement for ICEM plants) in FY25 / FY26 / FY27 respectively;

7) The management mentioned that net debt has largely peaked and is expected to fall gradually in the coming years;

8) UltraTech is targeting double-digit volume growth, suggesting market share gains could continue.

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SEBI Registration Number is INM000010361