Buy UltraTech Cement, target price Rs 8850: ICICI Securities

ICICI Securities has buy call on UltraTech Cement with a target price of Rs 8850. The current market price of UltraTech Cement is Rs 7407.95. Time period given by analyst is one year when UltraTech Cement Ltd. price can reach defined target.

UltraTech Cement Ltd., incorporated in the year 2000, is a Large Cap company (having a market cap of Rs 213733.65 Crore) operating in Cement sector.

UltraTech Cement Ltd. key Products/Revenue Segments include Portland/Possolana Cement, Other Operating Revenue, Scrap, Sale of services, Lease Rentals for the year ending 31-Mar-2021.



Financials
For the quarter ended 30-09-2021, the company reported a Consolidated Total Income of Rs 12156.83 Crore, up 1.01 % from last quarter Total Income of Rs 12034.71 Crore and up 15.90 % from last year same quarter Total Income of Rs 10489.10 Crore. Company reported net profit after tax of Rs 1310.26 Crore in latest quarter.


Investment Rationale
The brokerage expects UltraTech Cement (UTCEM) to continue to post industry leading growth and profitability over FY21-24E backed by low-cost brownfield expansions and increased cost efficiencies. Its diversified pan-India market mix, premium brand positioning, strong distribution network and large presence in non-trade segment allow it to wither current demand uncertainties much better than peers. Cost saving initiatives may result in Rs100/te benefits (our estimate) by FY24E, and RoCE (post-tax) may expand by >400bps over FY22-24E to ~17%. Dividend payout ratio has increased from 10% in FY20 to 20% in FY21 which may rise further as UTCEM is likely to generate Rs200bn FCF over FY21-24E. The brokerage maintains BUY with an unchanged target price of Rs8,850/sh (15x Dec’23E EV/E). UTCEM remains top pick. Key risk: Lower demand/pricing.

Promoter/FII Holdings
Promoters held 59.96 per cent stake in the company as of 30-Sep-2021, while FIIs owned 16.48 per cent, DIIs 14.51 per cent.