Buy Ultratech Cement, target Rs 4,247: Axis Securities

Axis Securities has given a 'buy' recommendation on Ultratech Cement with a price target of Rs 4,247, which suggests a potential upside of 10 per cent.

INVESTMENT RATIONALE

Better realizations despite low demand off-take

The company has reported Higher profitability on better realization as cement prices increased across regions in Q1. Cement volumes improved 2 per cent YoY to 17.9 million tonnes, including newly-acquired Nathdwara plant (formerly Binani Cement).

Focus on integration and sweating of acquired assets
Nathdwara Cement (formerly Binani Cement) is fully integrated with UltraTech. Capacity utilization for Q1 at 60 per cent – low, due to an outage. The 21.2 million tonnes acquired JP Assets is now EPS accretive with 68 per cent capacity utilization; Century Cement is expected to merge in Q2FY20 pending few approvals. The management expects increased contribution via trimming cost and integrating acquired assets. Also, there are no further plans of organic/inorganic expansion.

Demand recovery and increased government infra focus
The recovery in demand post-monsoon and expected government spending will augur well for the company.