Buy UltraTech Cement; target of Rs 7350: Emkay Global Financial

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Emkay Global Financial's research report on UltraTech Cement

UltraTech’s consolidated EBITDA declined ~4% YoY/increased 25% QoQ to Rs23.4bn in Q3FY23, coming in 6% below our estimates (in line with consensus) owing to higher than expected cost/ton. Blended EBITDA/ton fell 14% YoY/increased 12% QoQ to Rs904 (Emkay est.: Rs985). In Phase-1, the company’s domestic grey-cement capacity is expected to increase to ~131mt by FY23-end from ~121mt currently. It may further rise to ~154mt by FY25E under Phase-II which should propel volume growth and market-share gains. Management’s commentary is cautious, as it does not expect any significant movement in cement prices in the near term, and input cost is expected to remain elevated over the longer term.

Outlook

Factoring-in the Q3 miss, the slow pace of price hike and higher fuel cost/ton, we reduce our FY24E-25E EBITDA by 4-6% with revised TP of Rs7,350/sh (earlier Rs7,100), based on 13x Mar-25 EV/E (on half-yearly roll-over). We maintain BUY, given that the company’s extensive pan-India presence, premium brand positioning, and focus on cost efficiency make it better placed to improve its margin in the medium term.