Buy Ultratech Cement Ltd For Target Rs. 15,210 By Choice Broking Ltd
UltraTech Cement has a consolidated grey cement capacity of 190.46 million tonnes per annum (MTPA), supported by 34 integrated plants, 34 grinding units, 1 clinker unit, and 9 bulk packaging terminals. Backed by a strong network of over 1.3 lakh channel partners, the company has a market presence across more than 80% of India. UltraTech is also the largest manufacturer of Ready Mix Concrete (RMC) in India, operating 395 RMC plants across 155 cities, and offers a wide range of specialty concretes tailored to specific customer needs.
How does UTCEM scale, pricing power, and capital efficiency contribute to its shareholder value creation?
UltraTech Cement (UTCEM), India’s largest cement manufacturer, continues to maintain a dominant position in the industry with a consolidated capacity of 190.5 MTPA as of FY25 – having nearly double the capacity of its closest peer (ACC+ Ambuja at ~100 MTPA). Other major peers such as Shree Cement (57 MTPA) and Dalmia Bharat (~45 MTPA) trail significantly in terms of scale.
Ultratech’s Pan-India presence and well-diversified plant footprint allow it to optimize supply chains, capture regional demand pockets effectively, and command a small edge in pricing and cost structure. This is evident from its industry-leading realization of INR 5,592/ton, well above the peer average of ~INR 5,203/t. Barring JK Cement (INR 5,875/t due to higher white cement contribution), UTCEM stands as the leader in the grey cement segment. In terms of return ratio, we forecast UTCEM to deliver a healthy Return on Capital Employed (ROCE) of 15.6% by FY28E.
What are the key cost optimization initiatives UTCEM is undertaking, and how are they expected to impact its EBITDA per tonne by FY27?
UTCEM is actively working to enhance its Waste Heat Recovery System capacity from 351 MW in FY25 to 500 MW by FY27. Additionally, it is targeting 2.1 GW of renewable energy capacity by FY27, which is expected to meet ~30% of its total energy requirements. We believe these initiatives will help lower power and fuel costs by ~INR100/t by FY27. Furthermore, the company plans to reduce its lead distance by 25 km, which is expected to bring down freight costs by ~INR60/t. With its consistent focus on cost optimization, we expect UTCEM’s EBITDA/t to improve to INR1,221/t in FY26E and further to INR1,326/t in FY27E.
Valuation: We maintain our BUY rating with a revised target price of INR 15,210, driven by upward revisions in volume and EBITDA/t assumptions following the integration and turnaround of Kesoram and India Cements, benefits from ongoing cost optimization initiatives, an improving cement pricing environment across regions, and the adoption of a robust EV/CE-based valuation framework that better captures the company’s strengthening fundamentals, including a projected 720bps ROCE expansion over FY25–28E.
Risk:
Heatwave-Driven Demand Risk: Prolonged or intensified heatwaves across key regions may lead to a slowdown in construction activities, negatively impacting cement demand and dispatch volumes.
Fuel Cost Volatility: A sudden spike in petcoke prices due to global supply disruptions or geopolitical tensions could significantly raise input costs, thereby pressuring EBITDA margins.
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