Buy UltraTech Cement Ltd For Target Rs. 14,150 By JM Financial Services
UltraTech Cement’s consolidated EBITDA for 1QFY26 was INR 44bn with blended EBITDA/tn at INR 1,197, broadly in line with our and consensus estimates. Its domestic grey cement capacity stands at ~187mt, which is likely to increase to ~212mt (~16% capacity additions) by FY27. The management is targeting to announce the next phase of capacity expansions in FY26. Accordingly, the company is likely to continue gaining market share in the coming years. It has witnessed marginal price improvement in Jul’25 across regions except in North and West. In India Cements, the company has maintained its target of achieving EBITDA/tn of >INR 1,000 by FY28 (INR 382/tn in 1QFY26). 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 expansion; and iii) improving profitability. We broadly maintain our FY26-28 EBITDA estimate and increase our Sep’26 TP to INR 14,150/sh based on 19x Sep’27 EV/E (post halfyearly roll-over). UltraTech is our top pick in the sector.
* Result Summary: UltraTech’s consolidated results were in line with our estimates. Consolidated volume grew by ~10% YoY/ declined 10% QoQ to 36.8mt. The management mentioned that UltraTech brand volume increased by 6.5% YoY in 1QFY26. Reported grey cement realisation grew 2.4% YoY/ 2.2% QoQ to INR 5,165 during the quarter. Total cost/tn declined 3% YoY/ grew 2% QoQ to INR 4,579. Blended EBITDA/tn increased ~33% YoY/ 6% QoQ to INR 1,197. Consolidated net debt increased INR 109bn YoY/ declined INR 13bn QoQ to ~INR 163bn as of Jun’25.
* What we liked: Improvement in profitability and reduction in net debt
* Earnings Call KTAs: 1) UltraTech aims for double-digit volume growth in FY26; 2) On the pricing front, South and East regions gained the maximum benefit in 1QFY26. Spot prices have risen in East, while they have gone up marginally in other markets. However, prices were flat in North and West. 3) The company has guided for capex of INR 100bn in FY26; it has already incurred ~INR 20bn in 1QFY26. 4) It is likely to announce the next phase of capacity expansion in FY26; 5) Consolidated net debt increased INR 109bn YoY/ declined INR 13bn QoQ to ~INR 163bn as of Jun’25. 6) In India Cements, the company has planned certain initiatives that will enable efficiency gain to start reflecting from 4QFY27. These include: conversion of 4/5 stage preheaters to 6 stage preheaters; cooler upgrade process optimisation; setting up of 21.8MW of WHRS and reliability improvement through digitisation. The company maintains its target of EBITDA/tn of >INR 1,000 for FY28. 7) In the W&C segment, it is on track with capex plans of INR 18bn. 8) Other highlights: Trade share declined by 170bps YoY to 66.3%; Premium share increased by 980bps YoY to ~34%; CC ratio increased from 1.44x YoY to 1.49x; Green share (WHRS & RE) increased by 1,160bps YoY to ~40%; Blended fuel cost decreased by INR 0.22 Mcal YoY to INR 1.78 Mcal; Lead distance decreased 16km YoY/ 14km QoQ to 370km.
