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We maintain BUY on UltraTech Cement (UTCEM) with TP of Rs14,700. KTAs from our analysis of UTCEM’s FY25 Annual Report: 1) Despite the weak pricing scenario (~7% YoY sharp decline in gray cement realization) in FY25, UTCEM posted a resilient EBITDA margin of ~16.5% (~18% in FY24) and EBITDA/t of Rs960 (Rs1,090 YoY). 2) It added 43mtpa (~30% of FY24 capacity base) in FY25, and is on track to surpass total capacity of 210mtpa by FY27, hence logging a strong ~70-75mtpa lead over Ambuja Cements (consol). 3) Leverage (FY25 net debt-to-EBITDA: 1.4x) in check despite heavy capex. We expect UTCEM to turn net cash by FY27E on the back of healthy cash flow generation and controlled capex. We maintain a positive stance on UTCEM (our top sector-pick) led by 1) healthy pricing environment in FY26TD, 2) visible turnaround in India Cements coupled with a strong EBITDA/t (Rs800 by FY27) guidance, 3) commitment to deliver >Rs300/t (already achieved Rs86/t in FY25) operational cost rationalization. We believe the likely GST rate-cut could accelerate market share gains in the medium term. We value UTCEM at 19x Jun-28E EV/EBITDA with TP of Rs14,700.

Resilient EBITDA amid weak pricing scenario in FY25

UTCEM reported ~7% YoY revenue growth in FY25, supported by ~10% volume growth, partly offset by lower realizations. Given its EBITDA holding higher sensitivity to realizations, EBITDA margin declined by ~180bps YoY to 16.5% despite the moderating fuel prices during FY25. EBITDA/t stood at Rs960 in FY25 vs Rs1,090 YoY; FY26E/FY27E/FY28E EBITDA stands at Rs1,220/1,420/1,550, respectively, on the back of stable realizations and cost optimizations. At the PBT level, margin fell by ~340bps to 9.9% (vs 13.3% in FY24) on account of higher depreciation and finance costs (including Kesoram’s high-cost borrowings). However, a lower effective tax rate on reduced taxable income partly offset the impact, resulting in ~8% PAT margin.

Balance sheet healthy despite heavy capex outflow in FY25

UTCEM reported FY25 EBITDA at ~Rs126bn, implying ~3% YoY drop. Similarly, operating cashflow (OCF) stood at ~Rs107bn – a meagre drop of ~2% YoY, aided by lower tax outflow. OCF-to-EBITDA stood at ~85%, indicating tight working capital management. The company spent Rs89bn primarily toward growth and efficiency capex. Besides the organic capex, UTCEM acquired 81.5% (including open offer) in India Cements during the year which resulted in cash outflow of ~Rs101bn. Further, wrt Kesoram Industries, the company took on ~Rs20bn of debt as a purchase consideration, while the balance was paid by issuance of shares. In total, the overall spend on capacity additions (including organic and inorganic) stands at ~Rs190bn as of FY25. Consequently, net debt rose to Rs177bn vs Rs28bn YoY. Despite the steep rise in leverage, net debt-to-EBITDA stood at a mere ~1.4x in FY25. Going ahead, on the back of healthy cash flow generation (~Rs590bn over FY26E-28E) and controlled capex outflow (~Rs250bn), we expect UTCEM to turn net cash by end-FY27E

Added 43mt in FY25; surpassing 210mtpa of gray cement capacity by FY27

UTCEM added ~43mtpa of gray cement capacity in India during FY25 of which ~16mtpa was organic and the balance ~26mtpa inorganic (India Cements and Kesoram Industries). UTCEM has outlined plans toward achieving domestic gray cement capacity beyond ~210mtpa by FY27. Such capacity addition is largely concentrated in the North (6.8mtpa), East (9.1mtpa), and South (8.7mtpa), while those in Central (1.8mtpa) and West (2.4mtpa) India are steady (Exhibit:4). Consequently, such capacity add shall grant UTCEM a handsome lead of 70- 75mtpa over Ambuja (consol), thus consolidating the company’s leadership position. Further, during FY25, UTCEM acquired 8.7% non-controlling minority stake in Star Cement (Star) from one of the promoter group entities of Star, for Rs7.8bn.

Foraying into other green pastures

UTCEM is extending its BPD arm into the Wires and Cables (W&C) segment, following the earlier launches in mortars, tile adhesives, waterproofing agents, AAC blocks, and grouting materials. The industry offers a large addressable market with strong growth visibility and attractive return potential. It has planned capex of Rs18bn for the next two years, toward setting up a plant near Bharuch, Gujarat, strategically located within 100km of copper sources; commissioning is targeted for Dec-26. The move aligns with UTCEM’s strategy of leveraging adjacencies in the construction value chain for strengthening its leadership in integrated building solutions.

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