Prabhudas Lilladher has given Accumulate recommendation for Ultratech Cement with a target price of Rs. 8535 in its research report issued on Jan 17, 2022

Prabhudas Lilladher’s research report on Ultratech Cement

UTCEM reported Q3FY22 earnings below our/consensus estimates (CE) by 9%/10%, largely due to steeper than expected increase in cost and in-line realisations. EBITDA/t fell 20% YoY/20% QoQ to Rs1,062 (PLe: Rs1,160). Street attributes the slide in margins over last couple of quarters to abnormal increase in costs and erratic recovery in prices coupled with demand impacted by unseasonal rains, sand shortage, etc. However, we believe that scope for improvement in margins is very limited as sector is generating strong cash flows with continuous capacity addition. This could potentially be the key driver for earnings downgrade by street. We continue to like UTCEM given its market leading position (20%+ market share), strong B/S (Net debt/EBITDA at 0.5x) and efficient operations.


However, high expectation with 2-year volume CAGR of 12%, EBITDA/t of Rs1,300 and rich valuations of EV/EBITDA of 14.2x and P/E of 24.6x FY24e leaves limited upside with potential risk of earnings downgrade. We downgrade stock to ACCUMULATE with revised TP of Rs8,535 (earlier Rs8,650) EV/EBITDA of 15.5x FY24e.

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