UltraTech Cement shares fell over 1% on October 20 after reporting results that missed most analysts' estimates owing to higher costs that left margins underwhelmed.
However, brokerages reiterated their positive outlook on the country's top cementmaker's earnings in the second half of the fiscal year 2026 due to their capacity expansion plans. UltraTech had risen 2.5% in the last three sessions.
On October 17, UltraTech Cement posted 75% YoY jump in net profit and announced nearly Rs 10,300-crore capex towards increasing capacity. However, overhead costs rose 25% on a sequential basis, thus hurting margins.
At 11 am on October 20, UltraTech Cement shares were trading 0.6% lower at Rs 12,294 apiece.
Brokerages cheer capacity expansion plans
Domestic brokerage Emkay gave a "buy" rating for the stock with price target of Rs 14,000 even as profit missed estimates. The price target represents up to 14% upside.
Emkay said it is positive on continued momentum towards growing capacity, turnaround in acquired entities, commitment to deliver operational cost realisations.
Another domestic brokerage Centrum gave a "buy" rating for the stock with price target of Rs 13,678 and said the Q2 cost pressure is one-off and expects demand recovery in H2FY26. Centrum said robust capacity expansion pipeline should support volume growth.
Global brokerage Jefferies gave a "buy" call for the stock with price target of Rs 14,700, which implies up to 19.5% upside. Jefferies said stable pricing, GST cuts will boost premium cement demand.
Systematix also gave a "buy" call with price target of Rs 14,481 and is upbeat on growth of the Aditya Birla Group company and noted healthy volumes, high capacity utilisation, expansion plan.
Nuvama maintained "hold" on the stock with a target price of Rs 13,982.
UltraTech Q2 results
"UltraTech achieved a growth of 22.3% in domestic grey cement without considering the sales volumes of India Cements and Kesoram in the previous year since they were not part of UltraTech during that period. The Company has delivered a remarkable growth during this quarter," said an earnings statement from the Aditya Birla Group firm.
This growth has exceeded the expected industry growth of around 5% for the same period, it added.
Total expenses of UltraTech in the September quarter was at Rs 18,119.56 crore.
"Energy costs were lower by 7% YoY, while raw material costs rose 5% on account of an increase in the cost of flyash and slag. Operating EBITDA per tonne for the existing UltraTech assets of 166.76 mtpa is at Rs 966 per tonne," it said India Cements, a south India-based cement maker, which it acquired earlier this year and Kesoram have generated an operating EBITDA of Rs 386 per tonne and Rs 755 per tonne, respectively.
"Both the acquisitions are rapidly improving with 55% of Kesoram volumes and 31% of India Cements volumes already transitioned to the power of UltraTech brand," it said.
The board of the company, in its meeting held on Saturday, approved capex towards increasing capacity, with a mix of brownfield and greenfield expansion, including its newly acquired subsidiary India Cements, said the Aditya Birla Group flagship firm in a regulatory filing.
UltraTech Cement on Saturday announced an investment of Rs 10,255 crore, which will expand its production capacity by 22.8 MTPA in the segment, which is witnessing a consolidation.
On Friday, India Cement, the south India-based company, which UltraTech acquired in December last year, had announced an investment of Rs 440 crore for a proposed capacity addition of 2.8 million tonnes.
The investments will start "in a phased manner from FY28 onwards" and the company expects "cement capacity to top 240.76 MTPA" at the end of this capex cycle, also helped by its current ongoing capex.
"This move reinforces UltraTech's commitment to sustained growth and its role in meeting the evolving demands of the Indian market," said UltraTech.
UltraTech's existing capacity is 192.26 MTPA (million tonnes per annum). Earlier this year, it had set the target to cross the 200 MTPA capacity mark by the end of this fiscal year.
Besides organic growth, UltraTech, over the past decade, have added over 65 MTPA capacity through inorganic growth.
Aditya Birla Group Chairman Kumar Mangalam Birla said: "This latest capacity expansion follows more than Rs 50,000 crores invested over the past five years, underscoring deep and sustained confidence in the Indian economy and the scale of its infrastructure ambitions. Capital, when deployed strategically, has a catalytic effect." "It energises ecosystems, deepens industrial linkages, and creates durable employment," he said.
"With this investment, we are reinforcing momentum across core sectors and contributing meaningfully to the acceleration of India's economic flywheel," said Birla.
UltraTech competes with the Adani group in the cement business, which is also rapidly building capacities through acquisitions and organic expansion at existing plants.
Adani's Ambuja Cements, which has crossed 100 MTPA (Million Tonnes Per Annum) capacity in FY25 in a record time, mainly through acquisitions, now aims to reach 118 MTPA by FY26 and 140 MTPA by FY28, primarily through brownfield expansion projects.
With inputs from Agencies
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