Emkay Global Financial has given Buy recommendation for Ultratech Cement with a target price of Rs. 8500 in its research report issued on Aug 06, 2021

Emkay Global Financial’s report on Ultratech Cement

Ultratech mentioned key elements of its growth strategy in the FY21 annual report: 1) focus on cost optimization and efficiency improvements; 2) low-cost expansion largely through the brownfield route; 3) enhance balance sheet strength and return ratios. In terms of cost optimization and de-risking efforts, we estimate sustainable cost savings of Rs90-100/ton by FY24E from the growing share of green power, improving blended ratio, lower lead distance, and better operating leverage. Ultratech would be adding ~20mt capacities in a staggered way by FY23E at capex of Rs65bn (<US$60/ton, 75% brownfield). The proposed expansion will help to gain market share (140bps to 23% by FY23E), and boost profitability and return ratios. With strong FCF generation of Rs82bn p.a. over FY22-24E, we expect Ultratech to become net cash positive by FY23E. Capital is likely to be allocated for growth opportunities and the surplus would be paid as dividends.


We have a Buy rating on the stock with a DCF-based TP of Rs8,500 (Sep’22E), implying a 15x forward EV/EBITDA (vs. current multiple of 16x).

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