Buy UltraTech Cement Ltd for the Target Rs.13,220 by Motilal Oswal Financial Services Ltd
Strong volume growth; pricing recovery gaining traction Cost pressure to persist in near term; planning next phase of expansion
* UltraTech Cement (UTCEM) reported in-line 2QFY27 earnings, led by strong volume growth. Consolidated revenue/EBITDA increased ~19%/20% YoY to INR233b/INR37b. EBITDA/t increased ~7% YoY to INR974 (est. INR948). OPM expanded ~20bp YoY to ~16%. Adjusted PAT grew ~22% YoY to INR15b.
* Management remains constructive on the medium-term cement demand outlook. Cement prices strengthened in Sep-Oct’26, resulting in spot prices increasing ~5% vs. 2QFY27 average. However, near-term cost pressure persists due to elevated input material costs. The company is evaluating its next phase of organic capacity expansion beyond 240mtpa (by FY28E), with detailed plans to be announced before FY27-end. It is scaling up its C&W business, with a focus on product availability and execution.
* We maintain our earnings estimates for FY27/FY28. We value UTCEM at 18x FY28E EV/EBITDA to arrive at a TP of INR13,220. Reiterate BUY.
Sales volume up ~13% YoY; blended realization up ~5% YoY to INR6,095
* Consol. revenue/EBITDA/adj. PAT stood at INR233b/INR37b/INR15b (+19%/ +20%/+22% YoY and +6%/+5%/+2% vs. our estimates) in 2QFY27. Overall volume grew ~13% YoY to 38.2mt (in line). RMC revenue grew ~29% (+17% vs. estimate) and white cement revenue grew ~4% YoY (in line). Other operating income/t stood at INR71 vs. INR70/INR44 in 2QFY26/1QFY27.
* Blended realization rose ~5% YoY/2% QoQ. Grey cement domestic realization increased ~2% YoY (down ~1% QoQ). Opex/t increased ~5% YoY (+8% QoQ), led by ~8%/3%/2% increase in variable/freight cost/other expenses per ton, while staff cost/t declined ~3% YoY. EBITDA/t increased ~7% YoY to INR974. Depreciation/interest costs rose ~6%/20% YoY, while other income declined ~36% YoY. ETR was 27.0% vs. 25.1%/25.2% in 2QFY26/1QFY27.
* In 1HFY27, revenue/EBITDA/PAT grew 17%/16%/18% YoY to INR479.4b/INR87.4b/INR41.1b. OPM contracted 20bp YoY to ~18%. EBITDA/t increased 3% YoY to INR1,099. OCF stood at INR69.1b vs. INR55.7b in 1HFY26. Capex stood at INR57.7b vs. INR48.0b in 1HFY26. FCF stood at INR11.4b vs. INR7.7b in 1HFY26. Net debt stood at INR235b vs INR166b in Mar’26.
Valuation and view
* UTCEM’s 2QFY27 performance was in line with our estimates. The company reported robust volume growth and witnessed strong improvement in capacity utilization. Cement prices have recovered since Sep’26 and seen improvement in early-Oct’26. However, cost pressure remains a key near-term challenge. UTCEM continues to extend its lead over peers across capacity, market share, cost leadership, and cash flow generation.
* We estimate a CAGR of 13%/14%/15% in consolidated revenue/EBITDA/PAT over FY26-28. We estimate its consolidated volume CAGR at ~10% and EBITDA/t of INR1,130/INR1,186 in FY27/FY28 vs. INR1,103 in FY26. The net debt-toEBITDA ratio is estimated to remain range-bound between 0.8x and 1.0x. We estimate its RoE/RoCE to increase to ~13%/12% by FY28 from ~11%/10% in FY26, led by an improvement in profitability and lower costs for expansions.
* The stock is currently trading at 17x/14x FY27E/FY28E EV/EBITDA. We value UTCEM at 18x FY28E EV/EBITDA to arrive at a TP of INR13,220. Reiterate BUY.
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