UltraTech Cement - Journey Of Growth, Scale, Leadership: Motilal Oswal

Motilal Oswal Report

UltarTech Cement Ltd.’s consolidated net debt increased to Rs 217 billion after a slew of acquisitions in FY19-20. However, with successful integrations and a rapid scale-up in capacity utilisation in acquired assets, The company not only reduced its net debt (Rs 27.8 billion as of March 2024), but also expanded its domestic grey cement capacity to 140.8 million tonner per annum in FY24 from 109 mtpa in FY19 while maintaining its leadership position in the industry.

We believe the low-cost expansion (all Phase - I, II and III expansions entail capex of ~$70/tonne) and faster execution will improve return ratios. We estimate the company’s return one equity to increase to 14% by FY26-27 versus 12% in FY24.

We continue to believe in the company’s ability to gain market share, driven by its extensive operations, nationwide presence, and robust brand equity.

UltraTech Cements’ healthy operating performance with a large scale of operation and its leadership position in the industry warrant higher multiples.

The stock currently trades at 18.5 times FY26E enterprise value/Ebitda. We value the stock at 20 times June26E EV/Ebitda to arrive at a target price of Rs 13,300. Reiterate Buy.

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