UltraTech Cement gains 4%, hits record high on strong demand outlook

The company is witnessing strong demand from various infrastructure constructions such as highway construction, railways, metro rail, irrigation projects, airports and urban housing market

Shares of UltraTech Cement hit a record high of Rs 8,219.95, up 4 per cent on the BSE in Monday’s intra-day trade on strong demand outlook in an otherwise subdued market. In comparison, the S&P BSE Sensex was down 0.41 per cent at 59,856 points at 10:11 am.

The stock of Aditya Birla Group Company surpassed its previous high of Rs 8,070.60 touched on September 4, 2021. In past two weeks, the stock has rallied 15 per cent from a level of Rs 7,147 on October 25.

UltraTech Cement is witnessing strong demand from various infrastructure constructions such as highway construction, railways, metro rail, irrigation projects, airports and urban housing market in the Tier 2 and Tier 3 markets.

“Recovery in rural housing, higher MSP (minimum support price) for kharif corp; improved food grain production in rabi harvest; a third consecutive normal monsoon and pick-up in infrastructure-led construction activity are likely to drive cement demand off-take”, UltraTech Cement said while announcing September quarter results on October 18.

However, continuous increases input costs like coal, pet coke and diesel pose a challenge for the industry. “UltraTech is confident of weathering the storm of increase in input costs, with its sustainable efficiency improvement programs, accompanied by increase in selling price to absorb the increase in costs,” the company said.

While short-term demand of cement has got impacted due to Covid induced restrictions, the long-term growth trajectory of the sector remains healthy on strong infra pipeline of government across roads, metros and irrigation segment and upcoming state and general elections. Pick-up in urban housing, commercial real estate to fuel demands further.

Analysts at Anand Rathi Share and Stock Brokers continue to remain positive on the company on back of its strong business model, high operating margins, improving balance sheet, growing retail market share, brand transition, optimization of acquired business and capacity expansion. The brokerage firm maintains ‘buy’ rating on the stock with a revised target price of Rs 9000 per share.

“UltraTech has successfully integrated acquired assets while protecting its balance sheet. Given the positive outlook, the new capex targeting central and east region would address the issue of capacity constraint post FY24E. With a target to become net debt free by FY23E and with RoCE of 18% per cent, we remain positive on company and maintain BUY rating with a revised target price of Rs 8950 per share,” analysts at ICICI Securities had said in result update.