UltraTech Cement Q4 Results Review: See Margin Improvement On Higher Volumes

UltraTech Cement Ltd. may see strong volume growth along with lower fuel prices and operating leverage drive its margins for fiscal 2024, according to brokerages.

The comments come after the cement maker reported a weaker-than-expected net profit in the January-March quarter. The cement manufacturer reported a 32.29% decline in consolidated net profit for the recently concluded March quarter at Rs 1,665.95 crore, as against an estimate of Rs 1,792.19 crore.

UltraTech Cement Q4 FY23 (Consolidated, YoY)

• Revenue is up 18.36% at Rs 18,662.38 crore (Bloomberg estimate: Rs 18,498.85 crore).

• Ebitda is up 8.13% at Rs 3,322.49 crore (Bloomberg estimate: Rs 3,368.67 crore).

• Ebitda margin at 17.8% versus 19.49% (Bloomberg estimate: 18.2%)

• Net profit is down 32.29% at Rs 1,665.95 crore (Bloomberg estimate: Rs 1792.19 crore).

• The board approved a final dividend of Rs 38 per share for the fiscal 2023.

"We expect strong volume growth, lower fuel prices, and operating leverage to aid margins in fiscal 2024," said Kotak Institutional Equities.

As profitability is set to improve further with healthy volumes, any correction in stock price due to missed street view would be a good buying opportunity, according to B&K Securities.

Shares of the company fell 1.32% lower to close at Rs 7,456.6, compared to a 0.46% gain in the benchmark Nifty 50.

Total traded quantity stood at 1.6 times the 30-day average volume.

Of the 47 analysts tracking the stock, 39 maintain a 'buy', five suggest a 'hold', and three recommend a 'sell', according to Bloomberg. The 12-month consensus price target implies a potential upside of 12.4%.

Here's what analysts have to say about the results:

Kotak Institutional Equities

• Maintains 'reduce' and raises fair value to Rs 6,800 from Rs 6,350.

• The company's Q4 Ebitda was marginally lower than expected, led by weaker realisations.

• Expects strong volume growth, lower fuel prices, and operating leverage to aid margins in fiscal 2024.

• The company's expansion plans are on track to ensure sufficient headroom for growth.

• It will enable it to outperform industry volume growth in the medium term.

• Sees limited upside at current valuations of 12 times the EV/Ebitda ratio.

• Increases Ebitda estimates by 1.4–2.4% for fiscal 2024–2025, factoring in higher volumes.

B&K Securities

• Maintains 'buy' rating and raises the target price to Rs 8,525 from Rs 7,868.

• Healthy demand across most regions and market share gains led to strong volume growth.

• Utilisation improved to 95% in Q4 from 83% last quarter.

• Improvements in profitability were mainly led by better cost management.

• Expects improvement in profitability and healthy volume growth as pet coke and coal prices have moderated from peak levels.

• A stock price correction due to consensus misses could be a good buying opportunity.

• Expect fuel costs to moderate further in the coming quarter.

• Expects lower fuel costs, increased green power, digitisation, and scale to cut down the lead distance and ease operating costs over the medium term.

• Expects prices to remain broadly range-bound near the current levels.

• Operating costs may decline with lower fuel costs and logistics synergies in the coming quarters.

• Better operating leverage bodes well for an improvement in profitability.

• Upgrades FY24/25 Ebitda and profit after tax each by 2% and 5%, respectively.