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Neutral UltraTech Cement Ltd For Target Rs.10,164 By Yes Securities
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Result Synopsis
UltraTech Cement (UTCEM) reported inline revenue growth of +8% y/y supported by +6% y/y volume and +2% y/y NSR growth in Q3FY24. Surprisingly, the total cost/te came lower than expectation, which declined 3% y/y resulted in EBITDA/te of Rs1192, up by +32 y/y in Q3FY24. EBITDA / Adj. PAT grew by +39/68% y/y to Rs33/18bn on account of eased cost and healthy profitability. As of Q3FY24, UTCEM’s total grey cement capacity in India reached 133MTPA with Burnpur asset acquisition (0.54MTPA) and reach 77% utilization level in Q3FY24. The phase-II expansion of 24.4MTPA (incl. 1.8MTPA slag mill) will enhance the cement capacity to 157.4MTPA by FY25E and the pending debottlenecking of 2.65MTPA got deferred.
We continue to like UTCEM for its market leadership with a +20% share across India with robust growth plans and aggressive green energy investment for improving its green power share, which is supported by Strong B/S. Ongoing Phase-II expansion of 24.4MTPA will ensure UTCEM capacity growth rate of ~8% CAGR above the industry average of 5% CAGR over FY24-26E. Additionally, UTCEM announced phase-III expansion of 21.9MTPA with 10-12MTPA of clinker capacity by FY27E, which take UTCEM closer to 200MTPA aspiration. Supported by healthy profitability (est. EBITDA of Rs1150-1200/te for FY24- 26E), we expect a free cash flow generation of Rs150bn post the CAPEX outlay of Rs180bn over FY24-26E. However, the stock trades at 20/17x EV/EBITDA on FY25/26 which limits the upside for the stock in near-term. We valued UTCEM on 17x EV/EBITDA on FY26E and arrived at TP of Rs10,164 with a NEUTRAL rating.
Result Highlights
Volume grew by 6% y/y to 27MT and NSR grew by 2% y/y resulted in inline revenue of Rs167bn, registering a growth of +8% y/y in Q3FY24.
RMC & white cement revenue grew by 29% and 13% y/y respectively in Q3FY24.
Surprisingly, the total cost/te declined by 3% y/y (2% below YSECe) drives EBITDA/te of Rs1,192 (Rs1084/te YSECe), which grew by +32% y/y and +25% q/q in Q3FY24.
EBITDA increased by +39% y/y to Rs32.5bn translates to an EBITDA margin of 19.4% against YSECe of 17.6% in Q3FY24 as compared to 15% in Q3FY23.
PAT came in at Rs17.8bn (YSECe of Rs15.7bn) up by +68% y/y and +39% q/q due to healthy operating profit.
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