Buy Ultratech Cement Ltd For the Target Rs. 13,246 by Choice Broking Ltd
Cost Reduction plans on-target; increasing EBITDA/t makes us Buyers
UTCEM announced its Q3FY25 results yesterday, reporting robust volume growth and beating street expectations on all front
* Q3FY25 consolidated revenues at INR1,71,933Mn, (vs CEBPL est. INR1,71,005Mn), was up 2.7% YoY and up 10.0% QoQ. Total volume for Q3 stood at 30.4Mnt, up 11.2% YoY and 9.1% QoQ.
* Consolidated EBITDA for Q3FY25 was reported at INR28,871Mn, (vs CEBPL est. INR27,420Mn) was down 11.3% YoY and up 43% QoQ. EBITDA/t for Q3 came at INR951/t, down 20.2% YoY and up 31.1% QoQ.
* PAT for Q3FY25 reported at INR14,775Mn, (vs CEBPL est. INR13,181Mn) was down 16.9% YoY and up 80.2% QoQ. EPS for Q3FY25 is INR51.
Key to market dominance is through Southern India, UTCEM playing well: Management expects double-digit volume growth and a utilization rate of around 80% in FY26. We expect volume to come from the southern market because the company has aggressively grown its capacity in the south region from 26.2mtpa to 49.9mtpa (around 27.3% of Ultratech's total capacity), through the acquisition of India Cement and Kesoram. They further aims to reach about 60Mnt of capacity in south. On the back of this expansion in the south region, we predict volume to expand at a CAGR of 10.7% between FY24-FY27.
With an eye on Pan India Leadership: Management aims to increase its cement capacity from 140.8mtpa in FY24 to 209.3mtpa by FY27, growing at a CAGR of 14.1%. To meet its expansion strategy, the company has increased its capex for FY25 from INR80,000Mn to INR90,000Mn, with another INR90,000Mn planned for FY26.
And consistent cost reduction for sustainable growth: The company is doubling down on efficiency with a push into Waste Heat Recovery Systems (WHRS) and railway sidings, targeting an impressive 511 MW WHRS capacity. On the renewable front, they’re powering up with a 2.1 GW goal by FY27, expected to cover nearly 30% of their energy needs. These aggressive moves aren’t just green; they’re lean—slashing costs by INR292/t over three years and turbocharging EBITDA/t growth.
View and Valuation: We revise our FY26/27 EPS estimates by 6.1%/11.3% and upgrade the rating to ‘BUY’ with a revised TP of INR13,246, valuing it at 18x FY27 EV/EBITDA. The management is enthusiastic about cement demand & volume growth and expects a double-digit increase in FY26. Successful absorption of Jan25 price increase paves way for additional price increase in coming months.
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SEBI Registration no.: INZ 000160131
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