UltraTech Cement Ltd. share price target

UTCEM's 3QFY22 performance was impacted by cost inflation, primarily energy and other costs, leading to a 6.7pp YoY fall in EBITDA margin and 19% YoY fall in EBITDA/t. EBITDA fell 22% YoY, despite higher other operating income (up 2.3x YoY). Adjusted for tax write-backs, profit fell 26% YoY. The industry has seen peak of the fuel cost inflation and imported/domestic petcoke prices have declined 38%/33% from its peak in Nov-21. This should help cost moderate from 1QFY23. UTCEM is expected to benefit from capacity expansions (19.6mtpa over...

Net Debt fell 3% QoQ/Rs1.9bn to Rs61.5bn due to reduction in working capital 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...

We expect UltraTech Cement (UTCEM) to continue to post industry leading growth and profitability over FY21-24E backed by low-cost brownfield expansions and increased cost efficiencies. Its diversified pan-India market mix, premium brand positioning, strong distribution network and large presence in non-trade segment allow it to weather current demand uncertainties much better than peers.

Management expects to clock a growth of 6-8% YoY in 2HFY22 and has guided at a further round of price hikes to cover fuel cost inflation. Management expects industry capacity addition of 20-25 mt in FY22,which...

Ultratech Cement Limited is the market leader in the domestic cement industry.

Demand is expected to pick up in coming months. Company displayed resilient performance despite the coal shortage and oil price increases. However, margins are expected to remain under pressure in the shortterm owing to rising fuel costs. Taking a cautious view, we downgrade rating to HOLD with a TP of Rs. 7,780 based on 14x FY23E EV/EBITDA. Higher fuel costs and coal shortage impact margins Q2FY22 revenue rose 15.7% YoY to Rs. 12,017cr, supported by growth in cement sales volume of 7.9% YoY to 21.6mt and improved realisations (+7.2% YoY to Rs. 5,553/t). Despite the monsoon season, company witnessed robust demand with grey cement...

Net Debt increased by 6% QoQ to Rs63.4bn due to increase in working capital UTCEM reported Q2FY22 earnings in line with our estimates, largely due to one-time income in other operating income segment. While, costs came significantly above our estimates due to higher other expenses. EBITDA/t (Incl other operating income) fell 4.5% YoY (17% QoQ) to Rs1,320 (PLe:...

Ultratech Cement (UTCEM) Q2FY22 EBITDA was in-line with our estimate. Opex/t was up Rs389/t QoQ and 40% of it is driven by higher other expenses. Q2FY22 power and fuel cost increased by Rs47/t QoQ (4% QoQ) and is lower than our estimate due to low cost inventory, fuel cost efficiencies and higher consumption of green power. On pricing front, UTCEM has increased its prices by Rs10-15/bag in Oct-21 to offset the cost inflation. And has guided for EBITDA margin of 26-28% for the coming quarter. It has commissioned 1.2mt brownfield expansion in the Eastern markets and re-iterated to commission total 4mtpa in FY22E and 15mtpa in FY23E. UTCEM's balance sheet...

Other income rose 3.76% to Rs 140.05 crore. PBIDT rose 0.78% to Rs 2854.78 crore. Provision for interest fell 35.74% to Rs 229.98 crore. Loan funds declined from Rs 20,848.17 crore as of 30 September 2020 to Rs 15,238.25 crore as of 30 September 2021. Inventories rose to Rs 5,413.55 crore as of 30 September 2021 from Rs 3,907.04 crore as of 30 September 2020. Sundry debtors were higher at Rs 2,629.52 crore as of 30 September 2021 compared to Rs 2,242.08 crore as of 30 September 2020. Cash and bank balance rose to Rs 1,255.87 crore as of 30 September 2021 from Rs 945.50 crore as of 30 September 2020. Investments declined from Rs 9,864.57 crore as of 30 September 2020 to Rs 6,784.29 crore as of 30 September 2021....

UltraTech Cement’s (UTCEM) Q2FY22 consolidated EBITDA at Rs27.1bn (flat YoY) is broadly in line with consensus estimates. Consolidated volumes grew 8% YoY to 21.6mnte while EBITDA/te declined 7% YoY and 18% QoQ to Rs1,254/te due to various cost escalations. While investor’s concern around sharp cost increases seems valid, industry has demonstrated strong pricing resilience in the past. Our recent channel checks suggest companies have increased prices by Rs15-20/bag across regions.