This cement stock can surpass ₹11,500 mark after Q4 results, says analysts

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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UltraTech Cement shares were in focus on April 30, a day after India’s largest cement manufacturers reported its results for the January to March 2024 quarter. Analysts seem bullish on the firm amid expectations of continued growth visibility.

UltraTech Cement shares were trading 0.7% higher at ₹10,038.55 on BSE at 9:52 am. In the past year, the stock has increased investors’ wealth by 35% as against the benchmark Sensex which has risen 22% during the period.

Following Q4 results, brokerage firm CLSA said its EBITDA, or earnings before interest, taxes, depreciation, and amortization, of ₹4,114 crore came in above estimate on the back of better profitability despite a sharp correction in prices.

It added that the cement maker expects ₹200-300 per tonne cost reduction over the medium-term and that should drive up profitability even if prices remain soft. It also believes that strong organic capacity addition should drive industry-leading volume growth for UltraTech Cement. CLSA has forecast 10% volume and 8% EBITDA/tonne CAGR over FY24-27.

Citi, on the other hand, estimates a 12% volume CAGR through the period. It noted that the firm is trading at an EV/tonne of $175 versus a historical peak of $220.

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Morgan Stanley, with the highest target price of ₹11,600, pointed out that as demand improves, the company’s management expects prices to recover during the year. It also noted that the firm has guided for strong cost efficiencies to play out over the next few years.

Jefferies also explained that cost savings in the medium-term will be a driver for profitability. The brokerage has trimmed the FY25 EBITDA projection by 2%, however, it expects margin expansion in the current fiscal on the back of cost savings of the second half of FY24 continuing into FY25.

The brokerage commentary comes as UltraTech Cement’s consolidated net profit grew 35.24% year-on-year to ₹2,258.58 crore. This was helped by lower fuel and raw material costs along with operational efficiencies and sales increases.

Its revenue from operations was up 9.41% at ₹20,418.94 crore during the period. It was at ₹18,662.38 crore in the corresponding period a year ago. UltraTech’s total expenses in the March quarter stood at ₹17,381.09 crore, up 6.67%.

UltraTech’s consolidated sales volume was at 35.08 million metric tonnes (MT), up 11%. In this grey cement was at 33.22 MT. Its “domestic sales grew 11% year-on-year with capacity utilisation of 98%,” in the January-March period, according to the company’s earnings presentation.

Cement prices dropped 5% sequentially to hit a two-year-low in the reported quarter, as cement companies doled out discounts to meet their fiscal year-end volume targets and stave off tough competition in a seasonally strong quarter.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow