UltraTech Cement top loser after Q3 profit falls 37% but Morgan Stanley still sees 21% upside

UltraTech Cement reported a consolidated net profit of Rs 1,062.58 crore in Q3 but better than expected revenue at Rs 15,520.93 crore, which was 19.53% higher than the year-ago quarter

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UltraTech Cement stock price slipped more than 2 percent and was the top index loser in the morning trade on January 23 after the company reported a consolidated net profit of Rs 1,062.58 crore for the December quarter, down 37.86 percent from the year-ago period.

UltraTech Cement’s revenue from operations, however, rose 19.53 percent to Rs 15,520.93 crore from Rs 12,984.93 crore in the corresponding quarter of the last year, the Aditya Birla Group company said on January 21.

While the profit missed estimates, revenue was higher than expected. According to a brokerage poll conducted by Moneycontrol, net profit was seen at Rs 1,105.2 crore and consolidated revenue at Rs 15,191.5 crore.

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At 10.54 am, UltraTech Cement was quoting at Rs 6,997.65, down Rs 180.60, or 2.52 percent, on BSE. It touched an intraday high of Rs 7,180.75 and an intraday low of Rs 6,980.

Brokerages’ view

Global research firm CLSA has an “outperform” rating on the stock with the target at Rs 7,800 a share, an upside of over 11 percent from the current level.

It is of the view that Q3 EBITDA was largely in-line with estimates while it believes that the results were largely mixed. Outlook for the fourth quarter and beyond would the key, it said.

“Volume growth was encouraging, while flat realisation disappointed. Increase in profitability was led by benefits of operating leverage on higher volume,” it said.

Jefferies has a “buy” rating with the target at Rs 8,300 a share, an upside of more than 18 percent from the current market price. The global brokerage firm believes that consolidated EBITDA was near expectations.

“Sales volume growth was broad-based, while realisation growth was lower than estimates. Cost growth was moderately higher against estimates. Cost growth likely reflects high cost inventory remaining even as spot fuel costs are sliding,” it said.

Morgan Stanley has an “overweight” call with the target at Rs 8,500 per share, an upside of 21 percent from the current level.

It is of the view that EBITDA was in-line with consensus, with the key positives being volumes and realisations, partially offset by higher operating expenses. It prefers the company based on multi-year demand upcycle expectations and return ratios.

(With agency inputs)

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