UltraTech Cement (Hold)
Target: ₹7,663
CMP: ₹7,566.25
Ultratech Cement (UTCEM) Q3-FY22 EBITDA was lower than our/consensus estimate by 17 per cent/11 per cent. Weak result is led by weak volume (down 3 per cent y-o-y) and cost inflation as EBITDA/t was lower by ₹210/t q-o-q at ₹1,041 in Q3-FY22.
This has led us to cut EBITDA for FY22/23 by 11 per cent/3 per cent. But despite the cut in FY22 est., we expect EBITDA/t to improve q-o-q in Q4-FY22 by Rs180/t. This is led by price hike and uptick in volume witnessed in Jan-22, as UTCEM plant operating at utilisation of 85 per cent vs average of 75 per cent for Q3-FY22.
We have maintained FY24 estimate and target price of ₹7,663 (valuing at 13x FY24EV/EBITDA). From valuation perspective we are valuing at its +1STD to arrive at target price. But given negligible upside we have Hold rating. Capex outlook in Budget, sustenance of demand and Price hike is the key catalyst for stock performance.