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Buy Ultratech Cement target of Rs 8600: Prabhudas Lilladher

Prabhudas Lilladher is bullish on Ultratech Cement has recommended buy rating on the stock with a target price of Rs 8600 in its research report dated October 19, 2021.

October 19, 2021 / 10:35 AM IST
HDFC Securities research report's outlook and valuations:  500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" title="HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" width="100%" height="auto" >

HDFC Securities research report's outlook and valuations:  "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

 
 
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Prabhudas Lilladher's research report on Ultratech Cement


UTCEM reported Q2FY22 earnings in line with our estimates, largely due to one-time income in other operating income segment. While, costs came significantly above our estimates due to higher other expenses. EBITDA/t (Incl other operating income) fell 4.5% YoY (↓17% QoQ) to Rs1,320 (PLe: Rs1,355). Ex of other operating income, EBITDA/t fell 10% YoY/22% QoQ to Rs1,182 (PLe: Rs1,285) Backed by sound B/S (Net debt/EBITDA at 0.5x) and steady cash flows, UTCEM is expanding capacity by 17.5% or 19.5mnt over next couple of years along with sizeable investment in high payback and environment friendly renewable power (WHR + Solar) to increase its share to 34% by FY24 from current 14% of overall power requirement. Led by its dominant size (22% market share) and highly efficient operations, we believe that UTCEM stands out as the best candidate to play the sector.



Outlook


However, we expect near term weakness in the sector due to headwinds on margins coupled with unabated increase in energy cost. Reiterate BUY with TP of Rs8,600, EV/EBITDA of 17.0x FY23e.


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first published: Oct 19, 2021 10:35 am

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