A brokerage issued a buy recommendation on the shares of India’s largest manufacturer of grey cement and white cement producers, projecting a potential upside of 25%.
Ultratech Cement Ltd, a part of Aditya Birla Group. The company operates in the white business of manufacturing cement and ready-mix concrete. Its core activities revolve around the manufacturing and distribution of various cement products, predominantly within India.
As of March 2024, the company had a total cement capacity of 146.2 mtpa, with the North region accounting for 23%, followed by the West (21%), Central & East (19% each), South (14%), and Overseas (4%).
Currently, the company is in the process of further expanding its capacity to 174.2 mtpa by fiscal year 2026 and 188.9 mtpa by fiscal year 2027, with a target to surpass 200 mtpa by fiscal year 2028, up from the present 146.2 mtpa.
Over the FY21-24 period, the company’s revenue has shown a robust compound annual growth rate (CAGR) of 25.9%, while EBITDA and PAT have demonstrated CAGRs of 5.9% and 14.8%, respectively.
In comparison to the preceding quarter, operational revenue surged by 22% from ₹16,740 crore in Q3FY24 to ₹20,419 crore in Q4FY24. Additionally, net profit escalated by 27%, rising from ₹1,775 crore to ₹2,259 crore.
In the fourth quarter of the fiscal year 2024, the company experienced a notable 13% year-on-year growth in sales volume, attributable to capacity expansions amounting to over 20 million metric tons per annum (mtpa) within the last 14 months. The distribution between trade and non-trade channels stands at 65% and 35%, respectively.
ICICI Direct, a brokerage firm, has recommended a buy call on UltraTech Cement Ltd with a target price of ₹12,430, which reflects a 25 percent rise from the closing price of ₹9,972 per share on Tuesday.
Brokerage believes UltraTech’s aggressive capacity expansion will drive revenue, with ~10.8% CAGR expected from FY24-26E. EBITDA and PAT are projected to grow at 18.1% and 21.2% CAGR, respectively, during the same period.
Brokerage highlighted the company’s ongoing volume growth (~13% YoY in FY24) and rapid integration of new capacities to capture market share across regions. Additionally, UltraTech plans to expand its total capacity by 21.5 mtpa during FY25-26E, reaching 174.2 mtpa by FY26E (~9% CAGR over FY24-26E).
The brokerage anticipates the company to sustain volume growth above industry averages from FY24-26E, reaching 144 mtpa by FY26E. They project a 10.0% CAGR in volume growth, driven by capacity expansions, rising demand, and enhanced utilization rates.
They also expect EBITDA/ton to rise to ₹1255/ton by FY26E, propelled by cost-saving measures and operational efficiencies. Additionally, management foresees further cost reductions of ₹200-300/ton over the next 3 years, mainly through increased utilization of lower-cost renewable energy sources. Furthermore, UltraTech’s EBITDA/ton is expected to continue improving, supported by ongoing cost efficiency efforts.
The company is expected to allocate approximately ₹9500 towards Capex for FY25E. This trend is anticipated to continue for FY26-27E, with Capex remaining within a comparable range. Concurrently, the company targets achieving a net cash position by FY25E (excluding Kesoram), alongside maintaining a net debt ranging from ₹1500-2000 crore (inclusive of Kesoram).
On Tuesday, UltraTech Cement Ltd shares closed at ₹9,972 per share, up 0.07 percent from the previous close price on the National Stock Exchange. The company has a market capitalization of ₹ 2,87,885 crores.
Written by Omkar Chitnis
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