Buy UltraTech Cement, target price Rs 13,700: Motilal Oswal Financial Services

Motilal Oswal Financial Services has a buy call on UltraTech Cement with a target price of Rs 13,700. The current market price of UltraTech Cement is Rs 10,366.8. UltraTech Cement, incorporated in 2000, is a Large Cap company with a market cap of Rs 297368.28 crore, operating in the cement sector.

UltraTech Cement's key products/revenue segments include Portland/Possolana Cement, Cement Grey, Other Operating Revenue, Scrap, Lease Rentals, Sale of services for the year ending 31-Mar-2024.

Financials

For the quarter ended 31-12-2024, the company has reported a Consolidated Total Income of Rs 17437.62 crore, up 9.98% from last quarter Total Income of Rs 15855.46 crore and up 3.30% from last year same quarter Total Income of Rs 16880.45 crore. The company has reported net profit after tax of Rs 1474.77 crore in the latest quarter.

The company's top management includes Mr.Kumar Mangalam Birla, Mrs.Sukanya Kripalu, Mr.Sunil Duggal, Mrs.Alka Bharucha, Mr.Arun Adhikari, Mrs.Rajashree Birla, Mr.Atul Daga, Mr.K C Jhanwar, Mr.K K Maheshwari, Mr.S B Mathur. Company has BSR & Co. LLP as its auditors. As on 31-12-2024, the company has a total of 29 Crore shares outstanding.

Investment Rationale
There are signs of recovery in cement demand after the festive season, and Motilal Oswal Financial Services anticipates industry volume to grow ~4% YoY in FY25, implying ~7-8% YoY growth in 4QFY25. This growth is expected to be driven by pent-up demand, a rebound in government spending, and robust demand in the real estate and housing sectors. Strong volume growth and improvements in clinker utilization (estimated to peak in 4QFY25) are expected to support price hikes across the industry. Being the largest player in the industry with a pan-India presence, the brokerage expects UltraTech Cement to benefit from the cement demand recovery and price hikes.

Motilal Oswal estimates UltraTech Cement's consolidated revenue/EBITDA/PAT CAGR at ~17%/28%/32% over FY25-27. They estimate a consolidated volume CAGR of ~16%, aided by inorganic growth. They estimate its EBITDA/t at Rs 1,060/Rs 1,150 in FY26/FY27 vs. Rs 960 in FY25E (average of Rs 1,160 over FY20-24). The brokerage estimates the company's net debt to peak in FY26 at Rs 204b (vs. ~Rs 153 billion as of Dec'24). The net debt-to-EBITDA ratio is estimated at 1.2x/0.8x in FY26/FY27 (vs. 1.3x as of Dec'24 TTM). Motilal Oswal reiterates its BUY rating with a target price of Rs 13,700, valuing at 20x FY27E EV/EBITDA.