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Motilal Oswal
UltraTech Cement (Buy)
Target: ₹8,700
CMP: ₹7,649.3
Ultratech Cement has reported an 8 per cent/7 per cent y-o-y growth in volume/blended realisation. EBITDA margin declined by 339 bps y-o-y to 22.6 per cent due to energy cost inflation, further accentuated by higher maintenance and employee costs. EBITDA remained largely flat YoY at ₹2,710 crore (-18 per cent q-o-q). Market share gains should continue, aided by the ongoing 20 mtpa expansion programme (1.2 mtpa commissioned in October 21), which should drive a 10 per cent volume CAGR over FY21-24. We largely maintain our FY22-24 EPS estimates and expect 19 per cent EPS CAGR over FY21-24.
We expect cement demand to remain strong, led by the government’s thrust on infrastructure development and recent improvement in housing demand. Ultratech Cement is in a strong position to gain market share, led by its strong distribution network. A strong pipeline of expansion projects and scope for improvement in utilisation of existing capacities offer strong growth visibility.
We estimate Ultratech Cement to record a 12 per cent/19 per cent CAGR in consolidated EBITDA/adjusted PAT over FY21-24, driven by 10 per cent volume CAGR, better realisations and lower interest costs. Higher fuel prices remain a key risk to earnings growth.
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