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Reliance Securities
UltraTech Cement (Buy)
CMP: ₹4,087.05
Target: ₹5,000
UltraTech Cement Ltd is engaged in the business of cement and cement-related products. The company manufactures a range of products that cater to construction needs from foundation to finish, including Ordinary Portland Cement (OPC), Portland Blast Furnace Slag Cement (PSC), Portland Pozzolana Cement (PPC), white cement and white cement-based products, ready mix concrete, including specialty concrete, building products, such as aerated autoclaved concrete (AAC) blocks and joining mortars and a host of others in retail formats.
UltraTech Cement is likely to witness healthy traction ahead in the backdrop of huge capacity, likely pick up in demand scenario and steady pricing environment.
While unlike expectations industry’s realisation had softened sequentially in current quarter, we expect cost deflation and improvement in Century assets profitability will aid UltraTech Cement to report steady performance in the current quarter.
Consistent approach to trim cost along with focus on improvement in return on capital employed (RoCE) by balancesheet de-leveraging augurs well for UltraTech Cement. Going forward, we expect demand to recover in the coming months followed by increase in government spending.
We expect UltraTech Cement to report EBITDA/tonne of ₹1,188/₹1,152 in FY20E/FY21E.
We maintain our fundamental ‘buy’ rating on the stock with a target price of ₹5,000.
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