Weak demand, higher input costs may put pressure on UltraTech Cement

UltraTech Cement reported robust Q4FY25 numbers with strong realisations and some volume growth. Consolidated revenue was up by 13 per cent year-on-year (Y-o-Y) (+29.7 per cent Q-o-Q) to ₹23,060 crore.

 

Blended realisation per tonne improved 8.7 per cent Y-o-Y and rose 8.1 per cent Q-o-Q to ₹6,326 per tonne. Operating profit was up by 12.3 per cent Y-o-Y and improved 59.5 per cent Q-o-Q to ₹4,620 crore. The realisation of operating profit/tonne was up 8.0 per cent Y-o-Y (+32.9 per cent Q-o-Q) to ₹1,267/ tonne. 

 

Although opex rose, it was offset by strong realisation growth. The adjusted net profit was up 9.6 per cent Y-o-Y (+81.5 per cent Q-o-Q) to ₹2,470 crore. The net profit margin contracted to 10.7 per cent vs 11.1 per cent in Q4FY24.

 

The company has been successful in its ongoing efforts at cost optimisation. Renewable energy capacity increased to 752 megawatt (Mw) in FY25 from 612 Mw Y-o-Y, with a target of reaching 2.1 gigawatt (Gw) by FY27, covering 30 per cent of total energy needs. Investment in waste heat recovery systems (WHRS) is ongoing, with ₹1,000 crore deployed in projects which should pay back in three years.

 

The management is committed to delivering ₹300-plus/tonne operating profit improvements in core operations of UltraTech itself, and ₹86 per tonne has been achieved. For new acquisitions, India Cements is targeted to reach ₹500 per tonne operating profit by FY26, ₹800 per tonne by FY27, and over ₹1,000 per tonne by FY28, and Kesoram’s operating profit/tonne is expected to cross ₹1,000/tonne by Q4FY26.

 

UltraTech’s domestic grey cement capacity is 184 million tonnes per annum (Mtpa), and the management has guided for double-digit volume growth in FY26. Organic capex of ₹9,000 –₹10,000 crore is planned over FY26, including ₹7,000 crore towards strategic projects. The target is to expand to 212 Mtpa by FY27, with approximately 28–30 per cent market share.

 

India Cements achieved operating profit breakeven within the first quarter post-acquisition and crossed 1 million tonnes of monthly sales in March 2025 for the first time in history. Kesoram’s cement division was integrated from March 2025, with visible improvement. Full operational and brand integration of India Cements and Kesoram is targeted by FY27. UltraTech has nearly finished the acquisition of a white cement putty manufacturing facility, increasing its presence in value-added building materials.

 

Strong operational performance and acquisitions have ensured the company remains a market leader. The integration of acquisitions is continuing. The net debt/operating profit is comfortable at 1.16 times, and the aim is to deleverage to 0.5 times.

 

The management commentary highlighted that UltraTech with volume growth of 6 per cent outpaced industry volume growth of 4 per cent Y-o-Y in Q4FY25. Grey cement capacity utilisation was at 89 per cent in Q4FY25 and 78 per cent in FY25. Kesoram had an operating profit of ₹399/tonne in Q4FY25, and the target is ₹1,000-plus by Q4FY26. India Cement had operating profit breakeven with its highest-ever monthly volume of 1 million tonne plus in March 2025.

 

Strong double digit growth could be achievable through FY27 and the management guided for double-digit volume growth in FY26. As the industry consolidates, large players will grow aggregated market share from the current 57 per cent to 65 per cent–70 per cent. Consolidation will support pricing, economies of scale, and improve supply chains. Demand will be driven by higher infrastructure spending, rural housing growth, private sector capex among others.

 

However, UltraTech is highly valued compared to peers. Investors need to monitor for weakness in demand due to heat waves or monsoon, or further raw material inflation in pet coke or geopolitics triggering weak macroeconomic growth for the domestic economy.