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Capacity expansion, acquisition synergies and structural cost leadership strengthen long-term earnings visibility

We maintain our BUY rating on UltraTech Cement (UTCEM) with a Target Price of INR 15,210, as Q1FY27 reaffirmed the management's ability to deliver market share gains while preserving profitability consistently. Despite inflation in imported fuel cost, UTCEM reported record Q1 volumes, EBITDA and PAT, driven by strong operating leverage and disciplined execution. While the structural outlook remains intact, we anticipate Q2FY27 cost inflation of INR 120–130/t, primarily due to geopolitical disruption, impacting imported fuel costs and seasonal monsoon-related operating pressure, which could temporarily weigh on margin.

Our positive stance is underpinned by:

(1) Industry-leading capacity expansion pipeline, with 15.9 MTPA scheduled for commissioning in FY27E and 29.8 MTPA in FY28E, positioning UTCEM to capitalise on India's structural demand growth

(2) Cost-optimisation roadmap targeting ~INR 200/t savings over the medium term

(3) The management's confidence in delivering double-digit volume growth in FY27E

(4) Constructive pricing environment, with Q1FY27 exit prices remaining firm and momentum expected to sustain into the coming quarters

(5) UTCEM entering the Wires & Cables business with INR 18,000 Mn planned investment, targeting commercial launch in Q3FY27.

We estimate EBITDA to expand at a 12.3% CAGR over FY26–29E, supported by volume CAGR of ~9%, improving utilisation, acquisition synergies and a stable pricing environment. Return ratios should continue to improve, with ROCE expanding from 11.5% in FY26 to ~14.3% by FY29E, reflecting better asset utilisation and operating leverage from recent capacity addition.

We value UTCEM using an EV/CE methodology, assigning 3.8x FY28E EV/CE, which yields a 1-year Target Price of INR 15,210/share. Given its unmatched scale, disciplined capital allocation, accelerating synergy benefits and structural cost advantage, UTCEM remains our preferred large-cap cement play with superior long-term earnings visibility.

Q1FY27 result: Beats expectation on all fronts

UTCEM reported Q1FY27 consolidated revenue and EBITDA of INR 246.5 Bn (+15.9% YoY, -4.5% QoQ) and INR 50.2 Bn (+13.7% YoY, - 10.4% QoQ) vs CIE estimate of INR 241.6 Bn and INR 49.4 Bn, respectively. Total volume for Q1 stood at 41.3 Mnt (including Kesoram & India Cement) (vs CIE est. 41.2 Mnt), up 12.2% YoY.

Realisation/t came in at INR 5,967/t (+3.3% YoY and +3.4% QoQ), which is higher than CIE’s est. of INR 5,857/t. Total cost/t came in at INR 4,753/t (+3.8% YoY and +5.2% QoQ), which is higher than CIE est of INR 4,658/t. As a result, EBITDA/t came in at INR 1,214/t (vs CIE est. INR 1,199/t), up 1.4% YoY and down 3.1% QoQ.

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