UltraTech Cement Q2 Results Review - Sanguine About Demand Growth: Systematix

Systematix Research Report

UltraTech Cement Ltd.’s Q2 FY24 revenue was in line with our expectations while Ebitda/adjusted profit after tax was 6.3%/10.8% below our estimates. Domestic volumes grew 15% and total volumes grew ~16% YoY to 26.7 metric million tonne, clocking capacity utilization of 75%.

Net sales realisation at Rs 5,999/tonne was down by 0.2% YoY but was up 1.3% QoQ, in line with our estimate. Consolidated Ebitda came at Rs 25.5 billion, up by 36.8% YoY (-16.8% QoQ). Blended Ebitda/tonne rose 18.4% YoY to Rs 956 led by lower power and fuel expenses, partially offset by one-off expenses of ~Rs700 million (employee expense of ~Rs 400-500 million and other maintenance costs).

Trade volumes stood at 57% of the total sales. Blended fuel consumption of ~$162/tonne compared to $178/tonne in Q1 FY24. The share of blended cement stood at 70%. The clinker conversion ratio has consistently improved and now stands at 1.44.

UltraTech Cement is looking to complete phase II of capacity expansion by June 2025 which would add 24.4mmt (22.6 metric million tonne phase II and 1.8 slag mills) to reach 159.7 million tonnes per annum. Also, phase III of expansion is expected to be announced soon to bring the capacity to ~200 mtpa.

We keep our estimates unchanged and forecast a strong 11%/24%/37% compound annual growth rate in revenue/Ebitda/profit after tax over FY23-25E on the back of a 10% CAGR in grey cement sales volume.

We raise our target price to Rs 9,816 from Rs 9247 as we increase our enterprise value/Ebitda multiple to 17 times from earlier 16 times on the back of a strong demand environment. We maintain 'Buy' on the stock.

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