UltraTech Cement Q2 Results Review - Cost Decline, Recent Price Hikes To Improve Margins: Motilal Oswal

Motilal Oswal Report

UltraTech Cement Ltd.'s Q2 FY24 operating performance was above our estimates (6% beat on Ebitda), primarily led by higher ready mix concrete revenue and other operating income.

Ebitda stood at Rs 25.5 billion (our estimate: Rs 24.2 billion) and Ebitda/tonne came in at Rs 956 (our estimate Rs 905). Profit stood at Rs 12.8b (our estimate: Rs 12 billion).

The management reiterated its long-term capacity target of 200 million tonnes per annum, which implies ~7% capacity compound annual growth rate. Phase II expansion is at full swing and likely to be completed by H1 FY26. Post completion of this expansion, its cement capacity will increase to ~160 mtpa versus 132.65 mtpa currently. The next phase of expansion plan should be finalised in CY23.

We largely maintain our estimates and reiterate our 'Buy' rating on the stock, given its:

1. leadership position in the industry,

2. robust expansion plans without leveraging the balance sheet, and

3. structural cost improvement measures.

We value UltraTech Cement at 16 times Sep’25E (earlier FY25E) enterprise value/Ebitda to arrive at our revised target price of Rs 10,090 (earlier Rs 9,600).

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