Top Conviction Ideas : Buy UltraTech Cement Ltd for Target Rs. 13,840 - Axis Securities Ltd
* The company’s capacity expansion is on track. Its total grinding capacity in India stands at 187 mtpa after acquiring India Cement’s assets.
* The company plans to add a further 11 mtpa in FY26 and another 15 mtpa in FY27, bringing its total cement manufacturing capacity to 212 mtpa in India.
* With expanded capacity and scale, the company is positioned to strengthen its market leadership, targeting a market share increase from 25% to 28%. We project volume growth at a 1% CAGR over FY24–27E.
* In FY25, total efficiency improvements saved Rs 86 per tonne. The company projects a total cost reduction of Rs 200–300 per tonne over the next 2–3 years. We project that its EBITDA margins will increase to 22% in FY27E, driven by higher volume, better realisations, and cost optimisation initiatives.
* Between 2013 and 2024, the market share of large players increased from 46% to 55%, and by FY27-28, it is expected to rise further to 65%-70%. With the growing pace of consolidation and capacity expansion by top players, its overall market share is set to increase further. This trend will positively influence cement pricing, economies of scale, and supply chain efficiency. UltraTech, being the top player in the country, is well-positioned to benefit from this consolidation in the medium to long term.
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