UltraTech Cement Q2 Results Review: Analysts Optimistic On Long-Term Growth Despite Miss

Despite UltraTech Cement Ltd.'s weaker-than-expected earnings in the second quarter of fiscal 2025, brokerages like Citi Research and Jefferies remain optimistic about the company's long-term growth, citing robust capacity expansion plans and cost reduction measures. 

UltraTech Cement's consolidated net profit fell to Rs 825 crore, down from Rs 1,280 crore a year ago, missing Bloomberg consensus estimates of Rs 1,039.24 crore. The company's performance was weighed down by weak cement pricing and subdued demand due to the monsoon season. 

• Revenue down 2.4% to Rs 15,635 crore (Bloomberg estimate: Rs 15,711.18 crore).

• Ebitda down 20.8% to Rs 2,019 crore (Bloomberg estimate: Rs 2,314.22 crore).

• Margin at 12.9% versus 15.9% (Bloomberg estimate: 14.7%).

• Net profit down 35.5% to Rs 825 crore (Bloomberg estimate: Rs 1,039.24 crore).

Citi reiterated its 'buy' rating on UltraTech Cement, though it cut its target price to Rs 12,500 per share from Rs 13,000 apiece, implying a potential upside of 15.2%. The brokerage highlighted that industry demand was flat to negative during the quarter, but UltraTech is expected to see double-digit growth in the second half of the fiscal, outperforming the broader market. 

Spot realisations are approximately 2% higher than in second quarter, and costs are expected to improve by Rs 300 per tonne by September 2026, mainly due to logistics and renewable power investments. 

UltraTech's acquisition of stakes in India Cements Ltd. and Kesoram Industries Ltd. is still awaiting regulatory approvals, but Citi expects these deals to strengthen UltraTech's market position. The brokerage anticipates around 10% compound annual growth in volumes from fiscal 2024 to 2027, along with improvements in earnings before interest, taxes, depreciation, and amortisation per tonne.

Jefferies maintained its 'buy' rating with a target price of Rs 13,100 apiece, implying an 18% upside. 

The brokerage noted that UltraTech reported an Ebitda miss for the quarter at Rs 20.2 billion, compared to an estimate of Rs 21.7 billion, due to higher costs and lower-than-expected realisations. Unit Ebitda in India came in at Rs 730 per tonne, below estimates.

Jefferies, however, sees potential in UltraTech’s long-term growth, driven by its capacity expansion plans and cost-reduction measures, despite the near-term pressure on margins.