UltraTech Cement trades flat despite 16% growth in Q2 sales, bullish brokerage views

Morgan Stanley has given an ‘overweight’ rating on the cement-maker’s stock. Seeing an upside potential for the stock from current price levels, it has set the target price at Rs 9,300.

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The UltraTech Cement shares edged up only by a tad on October 3 despite a 16 percent growth in consolidated sales volume and an ‘overweight’ rating from Morgan Stanley.

In a regulatory filing at the exchanges on October 2, the company reported consolidated sales volumes for the July-September quarter at 26.69 million tonnes, while total sales volume for the domestic market, which includes grey and white cement, were up 15 percent on a yearly basis at 25.66 million tonnes.

Morgan Stanley, seeing an upside potential for the stock from current price levels, has set the target price at Rs 9,300.

“The sales volume figures for Q2 implies an 18 percent year-on-year growth in domestic grey cement volumes in the first half of FY24. Considering the strong volume growth, it seems that the market share gains are uninterrupted for the company,” it said.

In its recent sectoral update for building materials, Jefferies has retained its ‘buy’ rating on the company’s stock.

The foreign brokerage observed that overall demand levels for cement in August were robust while the off-take in September was affected by rains. Overall, it expects a double-digit demand growth in the ongoing fiscal.

“Strong exit prices in the July-September quarter and more price hike announcements in the offing will negate energy cost inflation worry. Price hikes announced for October are in the range of Rs 10-50/bag (up to 15 percent) across regions. While cost increase is a concern, continuous price increase announcements have reduced risk of downgrades,” it added.

At 1pm on the NSE, the UltraTech Cement stock was quoting at Rs 8,293.90, up Rs 39.05, or 0.47 percent.

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In a regulatory filing at the exchanges on October 3, the company also announced having signed a cooperation agreement through its wholly owned subsidiary Star Cement with Cemex, UAE.

“The partnership aims to recycle concrete waste in the construction industry as well as reduce carbon emissions and improve the overall environmental impact of construction projects,” the company said.

In its results for the April-June quarter, the company reported a 17 percent year-on-year (YoY) rise in revenue from operations at Rs 17,737.1 crore. Net profit for the quarter increased 6.8 percent YoY to Rs 1,690 crore. The operating profit margins for the quarter contracted by 300 basis points on a yearly basis to 17 percent.

UltraTech Cement, India’s largest cement maker by market cap, is a step-down subsidiary of Grasim Industries, a subsidiary of the larger Aditya Birla Group. Its product range includes ordinary portland cement, portland pozzolana cement, and other variants.

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