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Buy UltraTech Cement; target of Rs 8600: YES Securities

YES Securities is bullish on UltraTech Cement has recommended buy rating on the stock with a target price of Rs 8600 in its research report date October 18, 2021.

October 19, 2021 / 12:12 PM IST
HDFC Securities research report's outlook and valuations:  500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" title="HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" width="100%" height="auto" >

HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

 
 
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YES Securities' research report on UltraTech Cement


UTCEM’s upcoming capacities of 19.5MTPA would help to encash the strong prolonged cement demand and boost the volume growth over FY23‐24E. Thus, we believe UTCEM volume to grow at 10%CAGR over FY22‐23E. However, the inflating fuel/diesel cost is the major point of concern, but it is likely to pass on further in supply‐ chain with a potential price hikes. Additionally, the increasing WHRS/green power and the higher blending ratio and improving efficiency would further aid to maintain the strong EBITDA/te of +Rs1,400/te in FY22/23E. Thus, over strong operating profit we expect a robust free cash flow generation of Rs150bn over FY22‐23E despite the ongoing CAPEX.



Outlook


The Net Debt/EBITDA continue to remain at a bottom low of 0.47x in Q2FY22 v/s 0.44x in last quarter. At the CMP stock trades at 17/14.9x of EBITDA on FY22E/FY23E. Thus, we retain our BUY recommendation with a TP of Rs8,600 (unchanged), valuing the stock at 16x EV/EBITDA (unchanged) on FY23E on the back of strong realization, robust demand scenario, UTCEM’s ability to pass on inflating cost and capacity addition.


For all recommendations report, click here

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first published: Oct 19, 2021 12:12 pm

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