UltraTech Cement, on Friday, joined the elite club of companies with Rs 2-trillion market capitalisation (market-cap) on the BSE after the company's stock price rose 2.5 per cent and hit a new high of Rs 6,946 in intra-day trade. The stock has rallied 14 per cent in the current week, on robust demand and price hike reports.
With the market-cap of Rs 2 trillion, at 10:19 am, UltraTech Cement became the first cement company to join the elite group of companies. In the past six months, the stock has outperformed the market by zooming 77 per cent, as compared to 32 per cent surge in the S&P BSE Sensex.
Led by its dominant size and highly efficient operations, anlaysts believe that UltraTech Cement stands out as the best candidate to play recovery in the cement sector.
Following around 10 per cent year on year (YoY) growth in volumes in the October-December quarter (Q3FY21), brokerage firm Motilal Oswal Securities expects the sector's volumes to grow around 20 per cent YoY in January-March quarter (Q4FY21) (supported by the low base of 4QFY20 – volumes declined 13 per cent YoY on government-mandated lockdown in Mar’20).
Demand has been robust over Jan–Feb (+8–10 per cent YoY), led by a strong uptick in urban real estate and infrastructure activity. Regionally, demand continues to be strong in East, North, and Central, while it has now revived in West. South, however, remains weak with around 10 per cent YoY decline, the brokerage firm said.
“Construction and infrastructure activities are also picking-up of late. While we expect rural demand in FY21E to drive recovery on the back of normal monsoon and pick-up in individual housing building (IHB), FY22E would witness sharp pick-up in infra activity as well,” analysts at ICICI Securities said in Q3FY21 result update.
Given the positive outlook, the newly announced 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 23 per cent earnings CAGR in FY20-23E, the brokerage firm believes, Ultratech will remain a preferred play in the cement space.