Motilal Oswal, in its research report dated January 19, 2024, expresses bullish sentiments on UltraTech Cement, recommending a buy rating with a target price of Rs 12,000.
The report delves into UltraTech Cement’s recent operating performance and outlines the outlook for the company.
Research Insights on UltraTech Cement:
In the 3QFY24, UltraTech Cement’s operating performance closely aligned with Motilal Oswal’s estimates. The Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) amounted to INR 32.5 billion, slightly below the estimated INR 33.8 billion. The EBITDA per tonne stood at INR 1,191, compared to the estimated INR 1,236. Profit After Tax (PAT) at INR 17.8 billion was 7% below the estimation due to lower-than-expected other income and higher interest costs.
Despite these factors, the management remains optimistic about demand growth, anticipating an improvement in capacity utilization to approximately 80-85% in 4Q (compared to 77% in 3Q). While demand has rebounded in most markets, the North region lags behind. The company expects a 7-8% drop in average fuel costs over the next six months, and a capex of INR 90 billion is earmarked for FY24/FY25, aligning with accelerated expansion plans.
Motilal Oswal maintains its estimates and reiterates a buy rating on UltraTech Cement, citing its leadership position, robust expansion plans without leveraging the balance sheet, and structural cost improvement measures.
The valuation is based on 18 times the estimated FY26E Enterprise Value to EBITDA, arriving at a target price of INR 12,000.
Disclaimer: Investors are advised to exercise caution and consult certified experts before making any investment decisions. The opinions and investment tips expressed in this report are solely those of Motilal Oswal and do not necessarily reflect the views of Chennaiprint.in or its management.