Hold UltraTech Cement Ltd For Target Rs. 12,320 By Geojit Financial Services Ltd
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Long-term outlook remains positive
UltraTech Cement Ltd is the largest cement manufacturer in India. It produces grey and white cement and ready-mix concrete (RMC).
* In Q2FY25, UltraTech's consolidated revenue de-grew 2.4% YoY to Rs. 15,635cr, with sales volume increasing 4.3% YoY. The de-growth was due to weaker cement prices that reduced sales realisation 6.4% YoY.
* Capacity utilisation stood at 68.0% in Q2FY25 compared with 75.0% in Q2FY24 (85.0% in Q1FY25).
* EBITDA stood at Rs. 2,018cr, declining 20.9% YoY. EBITDA margin narrowed 302bps YoY to 12.9% due to lower topline and higher other expenses resulting from maintenance costs.
* Consequently, PAT decreased 36.0% YoY to Rs. 820cr, further impacted by higher interest expenses.
* UltraTech’s muted quarterly performance is attributed to sluggish demand, impacted by extended monsoon season. Nevertheless, the management expects good monsoons to propel rural demand in the near term.
Outlook & Valuation
UltraTech had a weak operating performance due to subdued demand and lower pricing. However, going forward industry growth is expected to pick up driven by rural demand along with the government’s thrust on infrastructure development and urbanisation. The company, with its strategic acquisitions and capacity expansion plans, is poised to benefit from these emerging opportunities. Hence, we upgrade our rating on the stock to BUY based on 20x FY26E EV/EBITDA with a revised target price of Rs. 12,320.
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SEBI Registration Number: INH200000345
