UltraTech Cement crosses Rs 1.5 trillion m-cap; stock up 7% in 3 days

The company informed, on December 3, that its board has approved increasing the firm's capacity by 12.8 mtpa, with a mix of brown field and green field expansion at a capex of Rs 5,477 crore

Shares of UltraTech Cement on Tuesday joined the elite club of Rs 1.5-trillion market capitalization (m-cap) on the BSE, as its share price hit an all-time high of Rs 5,208 after rising 3 per cent in intra-day deals.

With the market-cap of Rs 1.50 trillion, at 10:31 am, UltraTech Cement stood at number 22nd position in overall market-cap ranking, the BSE data shows.

In the past three trading days, the stock has gained 6.5 per cent after the company said, on Thursday, December 3, that its board has approved increasing the firm's capacity by 12.8 mtpa, with a mix of brown field and green field expansion at a capex of Rs 5,477 crore.

The additional capacity will be created in the fast-growing markets of the east, central and north regions in the country, UltraTech Cement said in a press release. This capacity addition will not impact the ongoing deleveraging program which is on track to make UltraTech debt-free by the time the expansion program is completed, it added.

The management said the cement industry has been witnessing healthy volumes post relaxation of lockdown, on the back of the government’s thrust on infrastructure, underlying demand from the rural economy and individual home builders.

Upon completion of the latest round of expansion, the company’s capacity will grow to 136.25 mtpa, reinforcing its position as the third largest cement company in the world, outside of China, it said.

Most of the brokerage houses have ‘buy’ rating on the UltraTech Cement with price target between Rs 5,533 and Rs 5,725.

“The management has guided that non-trade demand is recovering well, which should boost sales hereon. Continued cost controls should further support UltraTech Cements strong margins. In line with our view, UltraTech Cement continues to deliver margin expansion, asset sweating, and debt reduction,” analysts at HDFC Securities said in September quarter result update.

The demand from rural markets continued to improve and 50 per cent plus rural districts have shown improvement. Urban demand too has recently started improving.

“Cement demand recovery has surprised positively and management mentioned that current utilization is at 80-85 per cent (similar to Q4FY19) vs. average of 66 per cent in Q2FY21. This indicates that the industry is operating at optimum utilization in few regions at present, which, if sustained, can lead to price improvements,” analysts at Emkay Global Financial Services said in result update.