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Last Updated : Apr 25, 2019 01:29 PM IST | Source: Moneycontrol.com

Brokerages positive on UltraTech Cement, see double-digit upside; stock rallies

The cement major reported a whopping 108 percent year-on-year growth in March quarter profit at Rs 1,017 crore, driven by sales volume and operating income growth

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UltraTech Cement shares rallied 6.6 percent intraday to hit a record high of Rs 4,686.30 on April 25 as brokerages retained their positive stance on the stock after company's March quarter earnings.

The stock was quoting at Rs 4,661.50, up Rs 265.05, or 6.03 percent on the BSE, at 1216 hours IST. Grasim, which holds a major stake in UltraTech, also rallied 6 percent.

The cement major reported a whopping 108 percent year-on-year growth in March quarter profit at Rs 1,017 crore, driven by sales volume and operating income growth.

Standalone revenue from operations in Q4 increased 18.3 percent with sales volumes growth at 15.4 percent YoY. EBITDA (earnings before interest, tax, depreciation and amortisation) grew 30 percent YoY and margin expanded to 21.08 percent YoY (from 19.20 percent) during the quarter.

Brokerages remained positive on the stock with some also raising price target. Here is what they say:

Brokerage: CLSA | Rating: Buy | Target: Rs 5,270 | Return: 20 percent

We have a buy rating on the stock and raised price target to Rs 5,270 from Rs 5,025 earlier on strong end to FY19 and focus on reducing debt. We raised FY19-21 EPS estimates by 3-11 percent.

Management believes the industry is decisively in an upcycle.

Election outcome and monsoon are key events to watch.

Brokerage: Deutsche Bank | Rating: Buy | Target: Rs 4,815 | Return: 10 percent

We expect the margin to now exceed Rs 1,100 per tonne supported by price hikes and raise above consensus EPS estimates by a further 8-10 percent.

Stock is trading at 12x FY21 EV/EBITDA, 35 percent discount to 5-year average. Every 1 percent increase in price improves its FY20e EPS by 9 percent.

We have a buy rating on the stock and increased our price target to Rs 4,815 from Rs 4,575 earlier.

 

Brokerage: Prabhudas Lilladher | Rating: Accumulate | Target: Rs 4,700 | Return: 7 percent

 

We upgrade EBITDA estimates for FY20/FY21 by 15 / 21 percent to factor in higher realisations coupled with higher capacity utilisation, improved margins and deleveraging of Non-core assets in acquired assets. We upgrade the stock to 'Accumulate' with TP of Rs 4,700 (earlier Rs 3,725).

Brokerage: HDFC Securities | Rating: Buy | Target: Rs 5,140 | Return: 17 percent

We recommend a buy on UltraTech with a target price of Rs 5,140. We ascribe premium valuations to the stock owing to UltraTech's capacity leadership (25 percent market share in India) and superior operating profits outlook (Rs 1000/MT+), and stable balance sheet.

Strong demand and pricing outlook alongwith company's rising cost efficiencies and lower energy costs should boost profits in subsequent quarters.

Brokerage: Narnolia | Rating: Accumulate | Target: Rs 4,943 | Return: 12 percent

Company has posted 14 percent YoY growth in volumes primarily led by the strong demand in affordable housing projects. Going forward, general elections may impact some demand in beginning of financial year but post elections, infrastructural spending and Housing-For-All scheme to gain momentum which gives us strong volume growth visibility for the rest of the year.

We value Ultratech at Rs 4,943 on SOTP basis and recommend 'accumulate' rating in this stock.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.

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First Published on Apr 25, 2019 01:25 pm
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