Ultratech Cement stock has garnered mixed calls from analysts after the company reported a marginal miss on standalone operational performance for Q2FY25 owing to lower-than-expected volume growth and higher other expenses.
While subdued demand growth and a weak pricing environment keep brokerage cautious, infra investments gathering pace, and sustained momentum in urban housing are expected to be the growth drivers for H2 along with cost efficiency tailwinds.
Morgan Stanley maintained an 'Overweight' rating on Ultratech Cement with a target price of Rs 13,620 per share. Despite Q2 EBITDA coming in below estimates, the company is nearing the end of its earnings downgrade cycle, the brokerage noted.
Looking ahead, a pickup in demand and expansion in cement prices are expected to drive earnings growth over the coming years. Additionally, cost-improvement initiatives will contribute to strong earnings compounding in the future, said MS in its note.
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UltraTech Cement's Q2FY25 net profit fell 36 percent on-year to Rs 820 crore as a demand slowdown due to monsoon and project delays hit price realisations. A Moneycontrol poll of eight brokerage estimates pegged UltraTech’s Q2 net profit at Rs 1,062 crore.
The cement maker’s revenue from operations fell 2.3 percent YoY to Rs 15,635 crore, slightly better than the poll estimate of Rs 15,579 crore.
Nomura remained bullish on Ultratech as it maintained a 'buy' rating on the counter with a target price of Rs 12,350 per share. The firm expects cement maker's margins to improve from Q2 onwards, with EBITDA per tonne likely to expand due to lower power and fuel costs.
However, higher-than-expected Q2 employee costs affected EBITDA per tonne performance. UltraTech remains on track to achieve its capacity expansion and cost-reduction targets, the broking firm said.
Meanwhile, CLSA has issued a 'Hold' call on Ultratech with a target price of Rs 11,500 per share. Despite the decline in Q2 EBITDA due to multi-quarter low profitability, analysts believe that the quarterly results suggest a better second half, with double-digit industry demand growth likely. Specific cost-saving measures are also expected to improve medium-term profitability.
UltraTech’s strong capacity addition pipeline should lead to industry-leading volume growth, although CLSA sees downside risks to consensus expectations.
Nuvama remained cautious on Ultratech as well. While on-track completion of capex plans and efficiency focus is heartening, the weak sector fundamentals and risk of earnings downgrade in FY25 are issues of concern, the brokerage said as it maintained a 'hold' call on the stock with a target price of Rs 11,238 per share.
Material increases in costs or sharp decreases in cement prices remain the key risks for the firm.
On October 21, UltraTech Cement's shares closed 2.1 percent lower at Rs 10,839 on the National Stock Exchange (NSE). The stock has risen around 3 percent so far this year, underperforming Nifty's returns of 14 percent.
In the past 12 months, the counter has risen 30 percent. In comparison, Nifty rose 28 percent during this period.
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