Accumulate UltraTech Cement; target of Rs 10,286: KR Choksey

KR Choksey's research report on UltraTech Cement

UltraTech Cement reported a revenue of INR 1,67,400 Mn for Q3FY24, registering a growth of 7.9% YoY and 4.5% QoQ due to higher demand and price hikes. The revenue missed our estimates by 1.4%. Revenue for 9MFY24 grew by 13.3% YoY to INR 5,04,892 Mn. • EBITDA of INR 32,546 Mn (39.3% YoY, 27.6% QoQ) was 5.3% above our estimates due to lower-than-expected power and fuel costs, raw material costs and better operational efficiencies. EBITDA margin of 19.4% expanded by 439 bps YoY and 351 bps QoQ. EBITDA for 9MFY24 grew by 21.3% YoY while EBITDA margin expanded by 117 bps YoY, respectively. • PAT for the quarter increased by 67.9% YoY/ 38.7% QoQ to INR 17,770 Mn registering its highest ever quarterly profit and outperforming our estimate by a 6.6% due to higher EBITDA. For 9MFY24, PAT expanded by 39.7% YoY; PAT margin expanded by 178 bps YoY.

Outlook

We introduce FY26E numbers, with an EBITDA of INR 18,663 Mn. At current valuations, the Company trades at an FY26E EV/EBITDA multiple of 15.6x. We believe that the future growth prospects are currently priced in given the current valuation and accordingly we apply a 16.3x multiple to our FY26E EBITDA, resulting in a target price of INR 10,286 per share (previously INR 9,316). Given the modest upside of 4.6% from current levels, we downgrade our rating on UltraTech Cement to “HOLD” from “ACCUMULATE”.