UltraTech Q3 earnings cement bullish outlook on stock, rise in target prices

Ultratech Cement, part of the Aditya Birla Group, reported a 68% on-year increase in net profit for the October-December quarter at Rs 1,777 crore on the back of higher volume and lower costs. Revenue rose 8% on-year to Rs 16,740 crore.

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Brokerages have maintained their positive ratings on UltraTech Cement Ltd and raised the target price after the Aditya Birla Group company reported better-than-expected fiscal third quarter earnings.

Antique Stock Broking and Motilal Oswal Securities have retained their ‘buy’ ratings, while CLSA has maintained an ‘outperform’ tag on the UltraTech stock. While Antique increased its target price to Rs 11,200 from Rs 10,095 a share, Motilal Oswal Securities raised the target price to Rs 12,000, up 19 percent, and CLSA increased it to Rs 11,020, up 9 percent from earlier target.

UltraTech Cement, part of the Aditya Birla Group, reported a 68 percent on-year increase in net profit for the October-December quarter at Rs 1,777 crore on the back of higher volume and lower costs. Revenue rose 8 percent on-year to Rs 16,740 crore.

The UltraTech results exceeded analyst expectations with an Ebitda of Rs 3,250 crore (up 39 percent YoY). Despite a 5 percent on-year increase in volume and 77 percent utilisation, industry-wide demand softened 3-4 percent on-year, particularly in the North and East due to National Green Tribunal ban, labour/sand shortage, and festivities.

UltraTech has expanded into Jharkhand by acquiring 0.54-MTPA grinding capacity from Burnpur Cements for approximately Rs 170 crore, bringing its total domestic grey cement capacity to around 133MTPA. The FY24 capex guidance has been raised from Rs 6,000-7,000 crore to Rs 9,000 crore. In addition, the company plans to acquire Kesoram Industries (with a cement capacity of 10.75MTPA) for an estimated EV of around Rs 7,500 crore. After completing Phase II capex (at Rs 12,000 crore), UltraTech Cement will reach approximately 157MTPA capacity by the end of FY25.

It has also revealed Phase III capex plans (with an outlay of Rs 13,000 crore), aiming to achieve a capacity of around 179MTPA by FY27, excluding Kesoram’s assets.

Anticipating demand recovery in Q4 with high-single-digit growth, CLSA expects continued faster-than-industry growth, projecting an 11 percent CAGR in FY23-26, supported by capacity expansion.

Here’s what brokerages say about valuation, returns, capex, more

“Ongoing expansions will take UltraTech’s capacity from 135 tonnes to 179 tonnes, while Kesoram acquisition (link) would add 10 tonnes. Capex at $72 per tonne would generate 15 percent IRR per UTCEM which, we believe, implies Rs 1,300 per tonne Ebitda at 85 percent utilisation and Ebitda per tonne of Rs 1,300. It has guided for a capex of Rs 90 billion each in FY24-25, after which Rs 7 billion will be pending for ongoing expansion,” CLSA said in its note.

“We value UltraTech at 15.5x March 2026 EV/Ebitda, in line with the historical average. We believe this period indicates better visibility of demand and consolidation of the sector. Market leadership, strong growth visibility, and a diversified regional presence that helps balance adverse regional issues should support earnings. We believe UltraTech is best-positioned among the large-cap cement companies. However, our lower-than-historical median multiple reflects increased competition in the sector (with Adani entering) and lower utilisations, leading to lower pricing power,” the CLSA report added.

Investec has retained its ‘hold’ rating on the stock on expensive valuation while Dolat Analysis & Research has downgraded the stock to ‘buy’ from ‘accumulate’ due to the current rally in the stock.

“We decrease our estimates for FY24 factoring 9MFY24 primarily due to decrease in volume/ realisation/tn estimates by 2.9 percent/ 0.3 percent. We maintain our revenue estimates for FY25/ FY26, however increase EBITDA/ APAT estimates by 4.9 percent/ 4.3 percent and 5.1 percent/ 4.6 percent for FY25/ FY26, respectively, factoring increase in realisation/tn to Rs6,106 (avg. of H2FY24). We are carrying the increase in H2FY24 to FY25, thus maintaining our stance of 0% increase in prices”, Dolat Analysis said in its latest note.

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