UltraTech Cement - Well-Positioned To Capitalise On Demand Tailwinds; Maintain Buy: Axis Securities

Axis Securities Report

The industry is facing short-term challenges on account of higher competitive intensity, soft demand, and lower cement prices. However, we remain positive on UltraTech Cement Ltd. from a medium to long-term perspective as its demand drivers remain intact.

The industry is undergoing consolidation, and UltraTech, being the largest player with an estimated market share of 24%-25%, is expected to be a major beneficiary of this consolidation, benefiting from economies of scale, improved operating parameters, and supply chain efficiencies.

We expect the company to grow its volume/revenue/Ebitda/adjusted profit after tax at 11%/11%/20%/23% compound annual growth rate over FY24-FY26E respectively. This growth will be driven by robust demand, upcoming new capacity, ramping up of recently commissioned capacity, the benefit of lower commodity prices, a higher blending ratio, and an increasing share of green energy.

We value the stock at 19.5 times FY26 enterprise value/Ebitda, arriving at a target price of Rs 12,450 per share, implying an upside potential of 10% from the current market price.

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