ICICI Direct is bullish on UltraTech Cement has recommended buy rating on the stock with a target price of Rs 5350 in its research report dated August 09, 2019.
ICICI Direct's research report on UltraTech Cement
Higher realisations (up 14.2% YoY to Rs 5484/t) led to healthy margins and profitability growth for the company during the quarter. However, volume growth of 2.2% (17.9 MT vs. our estimate: 19.1 MT) missed our estimates marginally due to general elections, sand mining issues in some states and temporary slowdown in infra projects. Along with better pricing, cost also remained benign during the quarter with power & fuel and freight both declining by 3.7% YoY and 5.7% YoY respectively. As a result, EBITDA margin increased 834 bps YoY to 26% (vs. I-direct estimate of 21.9%) with company reporting EBITDA/t of Rs 1428/t (highest ever) during the quarter. With all major acquired units (except Century) now being streamlined with the company’s process, the focus of the management now is to bring down the debt using the free cash flows and optimise costs.
Hence, we continue to remain positive on the stock with a revised target price of Rs 5350/share (valuing at 15.0x FY21E EV/EBITDA).
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