In Q1, Ultratech Cement reported impressive revenue and profit, mostly due to double-digit volume increase and reduced expenses. But because cement costs vary widely around the nation, falling prices were a cause for concern. This fiscal year, the management anticipates muted demand but not a protracted slowdown.
With consolidated net profit of Rs 2258 crore, up 36% YoY and 27% QoQ, and consolidated sales of Rs 20,419 crore, up 9.4% YoY and 22% QoQ, the business announced good financial results. As of March 31, consolidated net debt was Rs2,779 crore, while EBITDA was Rs4,250 crore, increasing 25% QoQ and 23% YoY.
Although cement exports somewhat decreased, domestic sales of grey cement increased by 11% YoY and 31% sequentially to 33.22 million tonnes. Smaller categories like ready mix and white cement also showed increases.
Brokerage perspectives
The majority of brokerages kept their ratings after the outcome. Dolat Capital upped its target price for the shares to Rs 11,485 and upgraded the stock to buy from accumulate. Nuvama kept its target price for each share at Rs 10,024 and kept a hold rating. The target price was slightly trimmed by Jefferies India to Rs 11,500 per share from Rs 11,560, but the buy rating was kept.
Nomura kept its buy recommendation in place and increased the target price to Rs 12,000 by 20%. A buy recommendation was also maintained by B&K Securities, with a target price of Rs 11,189 per share.
The analysts' observations on Ultratech Stock after results are as follows:
Nomura: Ultratech wants to reach a 200MT or higher cement capacity. By FY27, it expects to increase to 183MT (not including Kesoram), which would be a 9 percent compound annual growth rate from FY24 to FY27. Phase 3 expansion plans call for a 22 MT capacity addition at a cost of USD 72/t, or 15% IRR.In order to increase Ultratech's capacity to over 190MT by FY27F, the firm is awaiting regulatory permissions for the purchase of Kesoram, which is anticipated to be finalized by March 2025. The management has faith that the 200MT capacity would be reached naturally.
Reduced consumption during the election quarter may result in reduced pricing despite recent price rises, with a forecast 1% sequential fall in blended realisation. The election quarter's volume slowdown may lead to a 7% increase in fixed expenses in 1QFY25F, which would cause EBITDA/t to moderate to Rs1,080/t in 1QFY25F.
Jefferies India: EBITDA increased by 24% YoY and 26% QoQ in the fourth quarter, exceeding Ultratech's performance forecasts. This was the case even though lower prices were offset by somewhat higher volumes (+11% YoY), higher other operating income, and lower overhead.
The management placed a strong emphasis on medium-term cost reductions of Rs 200–300 per ton in order to increase profitability. We have maintained our expectations for FY26 but have lowered our FY25 EBITDA estimate by 2%. This change is the result of our revised projection of flat price increase YoY (formerly anticipated at +1-2 percent YoY), which takes into account our forecast of margin improvement in FY25 as a result of cost-cutting measures carried out in the second half of FY24.
Dolat Capital: Ultretech is expected to reach 162.4/184.9 million tonnes per annum (mtpa) by FY25E/FY26E, up from 146.2/152.7 mtpa in FY24/Q1FY25. The total consolidated cement capacity would reach 199.6 mtpa by FY27E with additions like 10.75 mtpa from Kesoram and 5.4 mtpa from overseas, enabling future expansion. Deleveraging will result from robust operational cash flow, which has averaged Rs 144.6 billion annually during FY24–FY26E, and free cash flow, which has averaged Rs 34.6 billion annually over FY24–FY26E.
Being the biggest participant in the cement market in India, Ultratech enjoys a number of benefits. Furthermore, we expect to issue 5.97 million additional equity shares (2 percent) to shareholders of Kesoram Industries in FY26E.
B&K Securities: Ultratech surpassed industry standards as it maintained double-digit volume growth for the second year in a row. Following commissioning, rapid capacity utilization is indicative of a strong brand and distribution. A housing cycle upturn and ongoing infrastructure projects are likely to contribute to a strong demand trend, even with a brief period of stagnation. Growth in capacity is consistent with market trends, and cost-cutting initiatives improve the profitability forecast.
