Target: ₹13,000

CMP: ₹10,420.65

The board of UltraTech Cement has announced the company’s entry into the wires and cables segment with a planned capex outlay of ₹1,800 crore over the next 2 years. The plant will be set up near Bharuch, Gujarat, and the company aims to commission it by Dec’26.

On full ramp-up, we estimate potential EBITDA accretion of 4-5 per cent on FY27E EBITDA base. Given the group’s growth ambitions and UltraTech’s robust cashflow generation (OCF of ₹29,000 crore over FY26E-27E), we also don’t rule out the possibility of the group entering into other building solution segments in future.  Earlier, the group had announced its entry into the paints segment through Grasim. 

Though capex intensity is low and unlikely to stretch the balance sheet (net debt of ₹16,600 crore as of Dec’24), the investment into a non-cement business is likely to raise concerns over capital allocation. 

We maintain Buy with Mar’26E TP of ₹13,000 based on 19x FY27E EV/E as UltraTech’s return ratios are poised to improve structurally over the next 3-4 years owing to rising asset turnover, low cost of expansions, and rising profitability.

Published on February 27, 2025