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What should investors do with UltraTech Cement post Q2: buy, sell or hold?

The company reported an exceptional loss of Rs 335.73 crore.

October 22, 2020 / 02:56 PM IST

UltraTech Cement share price added 2 percent in early trade on October 22 after the company reported strong numbers for the quarter ended September 2020.

The company has reported a 113 percent YoY increase in Q2 FY21 consolidated net profit mostly due to the sale of its Chinese subsidiary.

Consolidated profit surged to Rs 1,235 crore in the quarter ended September 2020 from Rs 579 crore in the same period last year.

The company reported an exceptional loss of Rs 335.73 crore, including an impairment provision of Rs 57.92 crore, towards old advances for purchase of certain land and impairment provision of Rs 271.18 crore which has been made on a loan receivable (asset held for sale).

Also Read - UltraTech Cement Q2 profit jumps 113% to Rs 1,235 crore


Here is what brokerages have to say on the stock:

Morgan Stanley

Morgan Stanley has kept overweight rating with a target at Rs 4,870. There is a possibility of re-rating due to broad-based volume recovery. The profitability remains strong while deleveraging is a positive too.

Goldman Sachs

Research house maintained a neutral rating. The company trades at 13.1x versus ACC/Ambuja at 8.6x/10.7x FY22 EV/EBITDA.

Credit Suisse

Broking house maintained outperform and target raised to Rs 5,400 from Rs 5,000. It has raised FY21/FY22 EPS estimates by 15%/5% as the company is still attractive for its quality of business.


Research house Nomura has kept a buy rating on the stock and raised the target to Rs 6,100. The company reported strong performance and stronger commentary and it sees a broad-based demand recovery.

Nomura raised FY21/22/23 core EBITDA estimates by 33%/20%/15% and adjusted earnings increased by 49%/27%/20% for FY21/22/23, reported CNBC-TV18.


Jefferies has maintained a buy rating and raised the target price to Rs 5,600 from Rs 5,150. The volume growth was ahead of the estimate while market mix arrested QoQ fall in realization.

The unit EBITDA at > Rs 1,300/t is also quite strong, while healthy profitability & focus on capex/working capital helped to reduce debt. The commentary was fairly positive and raise EPS estimates by 5-30%, reported CNBC-TV18.


Research house CLSA has maintained a buy rating and increased target to Rs 5,600 from Rs 5,000. Company’s strong performance on all parameters drives 30% EBITDA beat. The volume outlook improved further with October utilisation at 80-85%.

The higher volume & profitability are likely to drive EBITDA and benefits of financial leverage will boost its EPS & returns. The deleveraging also remains on track and risk-reward is attractive at current levels, reported CNBC-TV18.

Motilal Oswal

Motilal Oswal estimates 13%/ 27% CAGR in consolidated EBITDA/ PAT over FY20-22E driven by 5% CAGR in volumes, lower operating costs and interest costs.

The valuation is reasonable at 11.7x FY22E EV/EBITDA and USD177/t of capacity, a 25% discount to its past five-year average and 30% cheaper than peer Shree Cement v/s the historical average of 10%. Broking house value stock at 14x FY22E EV/EBITDA to arrive at target price of Rs 5,600. Reiterate buy and top pick status in the cement sector.

Dolat Capital

The company will continue to witness healthy operating cash flow (average Rs 84.3 billion/year) and free cash flow (average Rs57.0 billion/year) leading to further deleveraging (Net D:E of 0.0.7x in FY23E vs. 0.42x FY20).

The company, being the largest player in the Indian cement industry is its biggest advantage. Thus, it maintains buy with an upward revised target price of Rs 5,736 based on 15x (5% discount to 5-year average) consolidated Sept’22E EV/EBITDA.


UltraTech continues to improve upon its operational outperformance during Q2FY2021 led by improved rural demand and a decline in opex/tonne. Going ahead, the company is expected to benefit from sustained rural demand, along with a kick start of government infrastructure execution during H2FY2021.

Further, the outlook for demand is expected to remain strong for FY2022. The improving demand and limited capacity additions is also expected to maintain healthy pricing discipline in the sector going ahead. Sharekhan continues to maintain a buy rating on the stock with a revised price target of Rs 5,500.

Prabhudas Lilladher

Company has swiftly transitioned into a strong state of operations with the successful integration of acquired assets of Century cement, JP associate’s cement plants and Binani cement. Backed by sound balance sheet (Net debt/EBITDA at 1.2x) and steady cash flows, company embarks on next round of growth with 9mtpa of new capacities scheduled for commissioning in next couple of years along with sizeable investment in high payback and environment-friendly renewable power (WHR) to increase its share to 30% from current 12% of overall power requirement.

Led by its dominant size (23% market share) and highly efficient operations, Prabhudas Lilladher believes that company stands out as the best candidate to play a recovery in the sector. It reiterates buy with a revised target price of Rs 5,400 (earlier Rs4,950), EV/EBITDA of 15x FY22e.

At 09:23 hrs UltraTech Cement was quoting at Rs 4,665.70, up Rs 36.60, or 0.79 percent on the BSE.

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Moneycontrol News
first published: Oct 22, 2020 09:39 am
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