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Flat topline growth: For Q1FY25, UltraTech Cement reported revenue of Rs.18,070 crore, marking a 1.9% year-on-year growth but an 11.5% quarter-on-quarter decline. The flat topline was due to lower volume growth and a decline in blended realization. Sales volume reached 32 million tons, a 6.6% increase year-on-year but an 8.9% decline quarter-on-quarter. Realization remained muted, declining by 4.5% YoY and 2.8% QoQ to Rs.5,656 per ton.

Constant EBITDA margins: UltraTech’s gross profits grew by 0.4% YoY but declined by 10.6% QoQ to Rs.14,846 crore, with a margin of 82.2%, reflecting a 124bps YoY decline and an 81bps QoQ increase. A one-off in other operating expenses led to flat operating performance, resulting in flat EBITDA growth of 0.3% YoY and a 26.1% QoQ decline. Management has indicated that other operating expenses will normalize around Rs.675 per ton for the full year, down from the current Rs.750 per ton, which is expected to improve EBITDA margins moving forward. For the quarter, the EBITDA margin stood at 16.8%, seeing a decline of 37bps YoY and 333bps QoQ due to decreased blended realizations by 4.5% YoY and 2.8% QoQ and higher other operating expenses. Additionally, PAT remained flat, growing just 0.3% YoY to Rs.1,695 crore in Q1FY25 from Rs.1,690 crore in Q1FY24.

Cost per ton declined: UltraTech’s total cost per ton declined by 4.0% YoY but increased marginally by 1.2% QoQ to Rs.4,704 per ton. Within these costs, power and fuel expenses decreased by 13.7% YoY but rose by 2% QoQ to Rs.1,406 per ton, while freight and forwarding costs declined slightly by 4.4% YoY and 1.2% QoQ to Rs.1,309 per ton. This cost moderation was passed on to customers, resulting in almost flat PAT margins for the year.

Key Highlights: 1) Ultratech is well on its path to achieve its capacity targets, during the quarter they added 8.7 MT of new grey cement capacity taking their total capacity 149.5 MT in India, while for the full year they will be adding total 16 MT capacities. 2) Company in next 3 years has targeted to reduce total cost by Rs 300/ ton on the back of operational efficiency. To do so they have taken following measures like reducing fuel and cost by increasing WHRS capacity (23 MW capacity added during quarter taking total to 301 MW) and increasing renewable share. And to reduce their freight and forward cost they are working to reduce the lead distance (15 km distance in quarter only and as the new capacities comes it will shrunk further). 3) Kesoram deal is well on progress and during the quarter they received CCI approval for the same. 4) Capacity Utilizations levels remains robust around 85%, North and central region operating around 82% to 85% levels, while south and west was around 85% to 90% levels but east was comparatively slow around 80% levels. 5) Pricing environment continues to remain muted same is expected in next quarter as well but management expects second half of FY25to be better. 6) Industry growth for the full year is expected around 7% to 8% while management guides to grow ahead of market in double digits.

Outlook & Valuations: Looking ahead, sector growth is expected to be driven by urban construction, real estate demand, and government spending on infrastructure and housing. UltraTech, as a leader, will benefit from these trends through organic expansion, improving volumes, utilization, and product mix, and inorganic growth via acquisitions. The use of green fuel and lower raw material costs will aid in margin improvement. We expect revenue and EBITDA to grow at a CAGR of 14.4% and 20.3% over FY25-26E. Given its strong position and financials, we assign an EV/EBITDA multiple of 18.5x on FY26E EBITDA, slightly above its 10-year average. Consequently, we revise our rating to Hold (from Buy) and increase our target price to Rs.11,629.

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