UltraTech stock at Rs 11,500? Check latest target price post Q4FY24 results

Cement industry giant UltraTech Cement surprised investors by surpassing expectations with its strong operational performance, supported by impressive volume growth in quarter-ending March financial results (Q4FY24).

The shares, on Tuesday, jumped over 2.38 per cent to hit an intraday high of Rs 10,200 apiece, following the result announcement. 

At 9:39 AM, UltraTech Cement shares were trading 0.66 per cent higher at Rs 10,028.25. By comparison, S&P BSE Sensex was up 0.19 per cent at  74,813 .77 levels.

UltraTech Cement’s consolidated grey cement volume rose 11 per cent on a year-on-year (Y-oY) basis while domestic sales also jumped 11 per cent.

 

The Mumbai-based company’s revenue from operations climbed 9.4 per cent to Rs 20,418.9 crore in Q4, as compared to Rs 18,662.4 crore reported a year ago. 

The cement manufacturer’s total income climbed over 9 per cent to Rs 20,554.5 crore for Q4, from Rs 18,783.89 in Q4Fy23. UltraTech Cement also declared an interim dividend of Rs 70 per share.

Overall, UltraTech Cement’s profit jumped 35.5 per cent Y-o-Y to Rs 2,258.1 crore for the quarter that ended on March 31 in financial year 2023-24 (Q4FY24), from Rs 1,666 crore in the same quarter last year (Q4FY23). Sequentially, the net profit soared a little over 27 per cent, from Rs 1,777 crore in the last quarter.

The company also commissioned a cement capacity of 7.8 MTPA, taking the total grey cement capacity of the company to 140.8 MTPA in the country.

Q4 conference call highlights

The volume rose 11 per cent YoY during the quarter against likely industry growth of 7–8 per cent. Additionally, prices decreased throughout Q4FY24, leading to a complete rollback of the price hikes taken in Sep–Oct 2023.

However, net debt rose to Rs 2,780 crore, from Rs 2,700 crore as at end-FY23. 

The company is targeting to be net-debt free by end-FY25 (excluding Kesoram’s debt) and with Rs 1,500–2,000 crore net debt, including the Kesoram acquisition. 

All India capacity utilisation also jumped 200 basis points to 71 per cent in FY24..

The management expects savings of Rs 200–300 per tonne in operating costs over the next two– three years due to higher blending, investment in green power/alternative fuels & raw materials(AFR), reduction in lead distance

Here is what the street said about the Q4 performance:

CLSA | Rating: Outperform | TP: Rs 11,020
CLSA analysts have issued an outperform recommendation for UltraTech Cement, citing higher-than-expected Ebitda due to improved profitability despite major price corrections. They attribute this to a solid 11 per cent year-on-year and 30 per cent quarter-on-quarter growth in volumes, which has boosted operating leverage. 

Additionally, they anticipate that ongoing cost reduction efforts will continue to enhance profitability, even if prices in the market remain subdued. Considering these factors, CLSA has given ‘Outperform’ rating with a target price of Rs 11,020.

HSBC | Rating: Buy | TP: Rs 11,100
We expect industry demand growth to slow down especially in the H1FY25 due to ongoing general elections in India. Furthermore, cement realisation could also be weak to stable for the year. Cement prices fell sharply through Q4FY24 (UltraTech reported 6 per cent Q-o-Q decline in realisations) and industry failed in its attempt to raise cement prices at the start of FY25, and now, the opportunity to raiseprices should come only post monsoons. 

Fuel cost tailwind is largely past us now; however, UltraTech still expects some savings to come towards end-FY25. We cut our estimates for FY25 and FY26, in line with near-term slowdown in demand.

Nuvama Institutional Equities | Rating: Hold | TP: Rs 10,024
While on-track completion of capex plans and efficiency focus is heartening, the weak sector fundamentals and risk of earnings downgrade in FY25 are issues of concern, analysts noted. 

“We value UltraTech Cement at 16x enterprise value/earnings before interest, taxes, depreciation and amortisation (EV/Ebitda) and maintain ‘Hold/SP’ with a target price of Rs 10,024,” Nuvama Institutional Equities said.

Key risks, analysts believe, will be material decrease in costs or sharp increase in cement prices.

Motilal Oswal | Rating: Buy | TP: Rs 11,500 

The brokerage firm largely maintains its estimates and reiterates ‘Buy’ rating on the stock, given its leadership position in the industry, robust expansion plans without leveraging the balance sheet, and structural cost improvement measures. “We value UltraTech Cement at 18x FY26E EV/Ebitda to arrive at our target price of Rs 11,500. We reiterate our BUY rating on the stock,” it added.

Emkay | Rating: Buy | TP: Rs 11,200

Building- in lower realisation, Emkay has cut FY25 Ebitda estimate by 4 per cent, though have raised FY26E Ebitda by 3 per cent as analysts integrate Kesoram financials. “We maintain our ‘Buy’ on the stock with unchanged target price of Rs 11,200, based on 18x Mar26 EV/E,” it added.

Analysts believe that controlled fixed operational expenses led to the profitability beat. However, a higher than expected dip in realisations Q-o-Q was something that did not impress the analysts.

Kotak Institutional Equities | Rating: Sell | Fair Value: Rs 7,200  

Those at Kotak Institutional Equities, meanwhile, have maintained a cautious stance. They expect muted energy costs, rise in green power and operating leverage to aid margin expansion over the medium term.

Analysts noted that UltraTech Cement’s Q4 Ebitda came in 8 per cent above estimates, led by lower costs, mainly due to operating leverage. 

Therefore, Kotak Institutional Equities has increased Ebitda estimates by 0.8 per cent/2.3 per cent for FY2025/26E, led by lower costs and higher volumes. The Fair Value (FV) increases to Rs 7,200, mainly led by roll-over to June 2026E. 

“We expect UltraTech Cement to continue to outperform peers on operational parameters and is best placed with superior growth visibility and execution. Maintain SELL on rich valuations at 16.1X EV/Ebitda or $208 per tonne EV FY2026E,” it added.