Broker’s call: Ultratech Cement (Add)

Target: ₹9,564

CMP: ₹8,453.75

Ultratech Cement has reported in-line set of results with EBITDA of ₹2,550 crore, up 37 per cent YoY. While volume growth was impressive at 15.5 per cent YoY, higher operating cost was offset by marginally better realisations. EBITDA/mt at ₹965 is down nearly ₹60/mt on QoQ basis as reduction in power & fuel cost is offset by higher other expenses and employee costs.

While results are largely in-line with expectations, all eyes are on pricing behavior in 3Q as cement prices in October are 5 per cent higher than Q2-FY24 average. The management mentioned that one must wait and watch to see whether pricing sustains at these levels and it’s too early to assume that it will remain higher. On the other hand, operating costs have started inching up again after hitting short term low in July 2023.

As a result, we have tweaked our pricing and cost estimates and as a result our EBITDA estimate for FY24 and FY25 is marginally lower. We introduce FY26 estimates and move our valuation forward to Sept-25 to arrive at our revised TP of ₹9,564 (₹9,340 earlier). We maintain our Add rating on the stock.