Motilal Oswal's research report on UltraTech Cement
UTCEM reported consolidated EBITDA of INR23.4b (estimated INR24.2b) and EBITDA/t of INR903 (estimated INR945). Adjusted PAT stood at INR10.6b (down 10% YoY; 5% below our estimate). Lower-than-estimated realization increase and unexpected increase in variable costs resulted in an earnings disappointment. The management expects a strong demand environment and utilization levels at 95-100% in 4Q (92% in Dec’22). We had highlighted in our sector update that industry clinker utilization levels should be at 89% in 4Q, which ideally should drive up profits improvement for the industry. We cut our FY24/FY25 EPS estimate by 5% (each). We reiterate our BUY rating on the stock, given robust expansion plans, structural cost improvement (increasing green energy share and logistics cost optimization) and strong balance-sheet (net-cash positive in FY25E).
The stock trades at 15.5x/13.4x FY24E/FY25E EV/EBITDA (v/s its 10-year average one-year forward EV/EBITDA of 15.7x). We reiterate our Buy rating on the stock by valuing it at 15.5x FY25E EV/EBITDA (v/s Sep’24 earlier). Our TP of INR7,875 (v/s INR7,770 earlier) offers a 15% upside potential.