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Pricing recovery and operating leverage to support earnings; cost inflation remains a near-term monitorable

We maintain our ‘BUY’ rating on UltraTech Cement (UTCEM) , with a TP of INR 15,210/share, supported by its industry-leading scale, cost competitiveness and long-term growth visibility. Despite near-term margin pressure from elevated fuel cost, strong volume growth and improving pricing momentum are expected to support an earnings recovery in H2FY27. Sustained price realisation and EBITDA/t improvement remain key to our thesis.

Our positive stance is underpinned by:

(1) Improving pricing momentum, with October spot realisation ~5% above the Q2FY27 average, supporting potential Q3 earnings recovery

(2) Strong volume growth, with Q2FY27 volumes up 12.9% YoY and capacity utilisation at 71%, reflecting market-share gains (especially in South market)

(3) UTCEM reiterated its target of achieving INR 1,400/t EBITDA by March 2028, but we have incorporated ~1,300/t

(4) Long-term growth visibility, supported by infrastructure spending, urban housing and capacity expansion towards 240 MTPA. We believe UTCEM is bestpositioned to benefit from an industry upcycle, given its scale, extensive market reach and capacity expansion.

However, we remain cautious about fuel-cost inflation and the sustainability of price hike. Fuel cost rose, from INR 45/bag in Q1FY27 to INR 51.5/bag in Q2FY27. While price hike should support margins, recovery hinges on sustained realisations and demand normalisation, with further cost escalation posing a key downside risk.

We estimate EBITDA to expand at a 14.0% CAGR over FY26–FY29E, supported by volume growth, operating efficiencies and acquisition synergies. We value UTCEM using an EV/CE methodology, applying a 3.8x FY28E EV/CE multiple to arrive at our one-year TP of INR 15,210/share. While our premium valuation reflects UTCEM's structural advantages, delivery of the anticipated earnings recovery remains critical. We retain UTCEM as our preferred large-cap cement play, with Q3FY27 pricing and margin performance being key monitorables.

Q2FY27 result: Strong volume growth amid cost headwinds

UTCEM reported Q2FY27 consolidated revenue and EBITDA of INR 232.9 Bn (+18.8% YoY, -5.5% QoQ) and INR 37.2 Bn (+20.3% YoY, - 25.8% QoQ) vs CIE estimate of INR 220.3 Bn and INR 34.5 Bn, respectively. Total volume for Q2 stood at 38.2 Mnt (including Kesoram & India Cement) (vs CIE est. 37.3 Mnt), up 12.9% YoY.

Realisation/t came in at INR 6,095/t (+5.2% YoY and +2.2% QoQ), which is higher than CIE’s est. of INR 5,907/t. Total cost/t came in at INR 5,121/t (+5.0% YoY and +7.8% QoQ), which is higher than CIE est of INR 4,982/t. As a result, EBITDA/t came in at INR 974/t (vs CIE est. INR 925/t), up 6.5% YoY and down 19.8% QoQ.

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