During Monday’s trading session, the shares of the third largest cement manufacturer in the world by capacity (excluding China) surged nearly 4.6 percent to Rs. 11,712.8 on BSE, after the company announced expanding capacity in Kukurdih, Chhattisgarh.
With a market cap of Rs. 3.37 lakh crores, at 01:42 p.m., the shares of UltraTech Cement Limited were trading in the green at Rs. 11,700, up by nearly 4.5 percent, as against its previous closing price of Rs. 11,199.5.
What’s the news:
According to the latest regulatory filings with the stock exchanges, UltraTech Cement announced that it has expanded its Kukurdih unit’s cement production capacity by 0.6 MTPA.
As part of its ongoing capacity expansion programs, the company has identified an opportunity to increase production at its integrated unit located in Kukurdih, Chhattisgarh. The unit’s capacity has increased by 0.6 MTPA, that is, from 2.7 MTPA to 3.3 MTPA.
With this addition, UltraTech Cement’s total cement capacity, including its overseas operations, now stands at 156.66 MTPA.
Management Guidance:
UltraTech Cement mentioned that its significant capacity expansion aims to leverage the considerable long-term growth potential of India’s cement industry. The company believes its growth path is closely linked to India’s overall economic expansion.
Additionally, it noted that by scaling up operations, it will be able to meet the increasing national demand for cement. With anticipated increases in government spending on infrastructure and growing demand from the urban housing sector, the company expects to achieve sustainable volume growth of 7-8 percent in the coming years.
During Q2 FY25, grey cement capacity expanded by 9.9 MTPA, taking the total grey cement capacity of the company to 150.7 MTPA in India.
As of FY24, the company’s grey cement capacity stood at 140.8 MTPA, with an aim to achieve a 157 MTPA capacity by FY25, 168.8 MTPA in FY26 and 183.5 MTPA by FY27. The company also plans to spread its presence across 70 locations across the country by FY27.
Over the next three years, UltraTech aims to invest a total of Rs. 32,400 crore, with a goal of reaching a capacity of 200 MTPA by 2028.
UltraTech plans to invest Rs. 9,500 crore in capex for FY25 alone. This is part of a larger strategy to increase its cement production capacity to 157 million tonnes per annum (MTPA) by FY25.
Jefferies Outlook on Cement Industry:
Cement stocks witnessed a significant rally on 2nd December, led by Ultratech Cement, which surged more than 4 percent emerging as the top gainer on the Nifty 50 index. The surge followed Jefferies’ positive outlook on the recovery prospects for Indian cement companies in H2 FY25.
Other cement stocks, including JK Lakshmi Cement, India Cements, JK Cement, Andhra Cements, Shree Cement, and ACC, also saw gains of 2-3 percent.
Jefferies has highlighted UltraTech Cement as its top choice among large-cap stocks and JK Cement as its mid-cap favourite, due to stabilizing prices and a strengthening demand environment.
The brokerage noted a moderate improvement in demand during October and November, with expectations of further recovery in Q4 FY25, driven by a revival in government capex. It projected volume growth of 8-10 percent for H2 FY25, contrasting with the flat performance in H1 FY25.
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Financials:
UltraTech Cement reported its results for the September quarter of FY25, which did not meet market expectations.
The company reported a marginal decline in revenue from operations, experiencing a year-on-year fall of nearly 2.4 percent, from Rs. 16,012 crores in Q2 FY24 to Rs. 15,635 crores in Q2 FY25.
Similarly, its net profit decreased during the same period from Rs. 1,280 crores to Rs. 825 crores, representing a decline of nearly 35.5 percent YoY.
Stock Performance:
The stock has delivered negative returns of nearly 13.2 percent in one year, as well as around 4.6 percent returns in the last six months. So far in 2024, the shares of UltraTech Cement have given negative returns of about 28 percent.
About the company:
UltraTech Cement Limited, one of the largest white cement manufacturers in India, is engaged in the business of manufacturing and sale of Cement and Cement-related products. It is India’s largest manufacturer of grey cement and ready-mix concrete, and one of the top manufacturers of white cement.
Written by Shivani Singh
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