Motilal Oswal has retained its 'buy' rating on UltraTech Cement, with a target price set at ₹12,000. The domestic brokerage's target has an upside potential of 19%, or ₹1,995 apiece, from its Saturday, January 20, closing price of ₹10,005.
"We estimate a consolidated volume CAGR of around 10% over FY23–26 and EBITDA/t of ₹1,090/₹1,220/₹1,300 in FY24/FY25/FY26 (vs ₹1,005 in FY23). We estimate its ROE/ROCE to improve to 15%/14% in FY26 vs 10%/9% in FY23, aided by profitability improvement and low-cost expansion. The stock trades at 19x/16x FY25E/FY26E EV/EBITDA (v/s its 10-year average EV/EBITDA of 16x). We value UTCEM at 18x FY26E EV/EBITDA to arrive at our TP of ₹12,000. We reiterate our BUY rating on the stock," the brokerage said in a report.
Explaining its rationale for a higher target, Motilal Oswal highlighted the cement firm's leadership position, robust expansion plans without leveraging the balance sheet, and structural cost improvement measures.
The company management remains optimistic about demand growth prospects and expects capacity utilisation to improve to around 80–85% in the fourth quarter, up from 77% in the third quarter, the brokerage report said.
UltraTech Cement has increased its growth capex guidance to ₹9,000 crore each in FY24-FY25 as against an earlier guidance of ₹6,000-7000 crore per annum.
Barring the North, demand has recovered in most of the markets since the middle of 2023, the cost has been falling, and the average fuel cost should reduce further by 7-8% over the next two quarters.
Domestic brokerage firm Nuvama has maintained a 'Hold' rating on the counter, while Antique Stock Broking and Emkay Global have retained their 'Buy' ratings. Meanwhile, global broking houses CLSA has maintained an 'Outperform' tag on the UltraTech stock, Morgan Stanley is 'Overweight', and Jefferies has a 'Buy' call.
| Brokerages | Ratings | Target |
| Morgan Stanley | Overweight | ₹12,000 |
| Jefferies | Buy | ₹11,560 |
| CLSA | Outperform | ₹11,020 |
| Nuvama | Hold | ₹9,121 |
| Motilal | Buy | ₹12,000 |
| Antique Stock Broking | Buy | ₹11,200 |
| Emkay Global | Buy | ₹11,200 |
Ultratech Cement registered almost 8% year-on-year revenue growth at ₹16,740 crore for the October to December 2023 period, the company’s financial results released on January 18 showed. The revenue is slightly higher than the CNBC-TV18 poll projection of ₹16,649 crore.
The cement maker’s net profit, meanwhile, has jumped 1.6 times, or 67%, year over year, to ₹1,775 crore in the third quarter of the 2023–34 fiscal, from ₹1,063 crore in the corresponding quarter last year. The profit is largely in line with the CNBC-TV18 poll estimate of ₹1,739 crore.
Check out our in-depth Market Coverage, Business News & get real-time Stock Market Updates on CNBC-TV18. Also, Watch our channels CNBC-TV18, CNBC Awaaz and CNBC Bajar Live on-the-go!
