HSBC maintains reduce rating on UltraTech shares, sees 39% downside

MUMBAI: HSBC has maintained a reduce rating on shares of UltraTech Cement following its second quarter earnings with an unchanged target price of Rs 2,440. The brokerage firm said that while the quarterly earnings were in line with expectation, factors such as rich valuation, softening realisation and overcapacity continue to be a cause of concern.

The target price implies a downside of 39.2% from current levels. On Tuesday, the stock closed at Rs 4,015.25 on the BSE, up 0.16% from the previous close.

In the second quarter, UltraTech reported earnings before interest, taxes, depreciation and amortisation ( EBITDA) on a standalone basis of Rs 1,150 crore, up 14% from the same period a year ago. This was in line with expectation of Rs 1,130 crore as improvement in costs offset lower realisation, which marked a decline of 3%.

On demand outlook, HSBC said the company's management has not provided any specific guidance during the quarter, there are downside risks to the company's earlier guidance of 7% after the lacklustre growth in the current financial year.

"We believe FY17 demand will come in the range of 5-6%. This still implies a robust demand growth for the remainder of FY17," said HSBC.