UltraTech Cement Q3 Results Review - Profitability Inline With Estimate; Outlook Positive: Motilal Oswal

Motilal Oswal Report

UltraTech Cement Ltd.’s Q3 FY24 operating performance was largely in line with our estimates. Ebitda stood at Rs 32.5 billion (estimate: Rs 33.8 billion) and Ebitda/tonne came in at Rs 1,191 (estimate: Rs 1,236). Profit after tax at Rs 17.8 billion was 7% below our estimate on account of lower-than-estimated other income and higher interest costs.

The management remains optimistic about demand growth prospects and expects capacity utilisation to improve to ~80-85% in Q4 (77% in Q3).

Demand has recovered in most of the markets, except the North region, since mid-December-23.

The cost has been falling and the average fuel cost should further drop by 7-8% over the next six months. Capex is pegged at Rs 90 billion for FY24/FY25 each given the accelerated expansion plans.

We largely maintain our estimates and reiterate 'Buy' rating on the stock, given its:

1. leadership position,

2. robust expansion plans without leveraging the balance sheet, and

3. structural cost improvement measures.

We value UltraTech Cement at 18 times FY26E enterprise value/Ebitda to arrive at our target price of Rs 12,000.

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