Shares of UltraTech Cement Ltd gained in Saturday’s trade after the Aditya Birla Group company reported broadly in-line operational performance in the third quarter of this fiscal (Q3FY24) with consolidated EBITDA increasing 39% year-on-year (YoY) and 28% quarter-on-quarter (QoQ) to ₹3,254 crore.
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Domestic brokerage firm Nuvama has maintained a ‘Hold’ rating on the counter, while Antique Stock Broking, Emkay Global and Motilal Oswal Securities have retained their ‘Buy’ ratings. Meanwhile, global broking houses CLSA has maintained an ‘Outperform’ tag on the UltraTech stock, Morgan Stanley is ‘Overweight’, and Jefferies has a ‘Buy’ call.
| Brokerages | Ratings | TP |
| Morgan Stanley | Overweight | ₹12,000 |
| Jefferies | Buy | ₹11,560 |
| CLSA | Outperform | ₹11,020 |
| Nuvama | Hold | ₹9,121 |
| Motilal | Buy | ₹12,000 |
| Antique Stock Broking | Buy | ₹11,200 |
| Emkay Global | Buy | ₹11,200 |
While Emkay and Antique have targets of ₹11,200, Motilal has raised its target to ₹12,000. CLSA, meanwhile, has upped its target to ₹11,020, Morgan Stanley ₹12,000, Jefferies ₹11,560.UltraTech has reported a 5% on-year volume growth in the quarter under review. The realisations improved 2% QoQ and YoY on account of price hikes undertaken in September 2023.
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According to Nuvama Institutional Equties, the management has indicated that price hikes have been rolled back largely.
Capex on track
The company has increased its growth capex guidance to ₹9,000 crore each in FY24-FY25 as against an earlier guidance of ₹6,000-7000 crore per annum.
Factoring in the healthy capacity expansion plans, which should allow UltraTech to grow at above industry volume growth, Nuvama has increased its enterprise value and EBITDA multiple to 15.5 times from 14.5 times. However, muted pricing environment has compelled the brokerage to slash its FY24 and FY25 EBITDA by 5% and 3%.
“UltraTech has reiterated to reach 180 million tonnes domestic grey cement capacity by FY27 (10% CAGR, excluding Kesoram Industries), which would enable it to post industry-leading volume growth over the next few years. We have yet to factor in Kesoram’s acquisitions in our estimates. Factoring in little lower volume growth, we have cut our FY25-26E EBITDA estimates by 1-4%,” Emkay said in a note to clients.
According to Morgan Stanley, the Q3 earnings are even better adjusted for higher ‘other’ opex. It further said that demand recovery and fuel cost moderation should support prices and drive margin.
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As per Jefferies, the fourth quarter will likely benefit from operating leverage and energy cost decline. The foreign brokerage has maintained its FY24 and FY25 EBITDA and raised its FY26 EBITDA by 3% on higher volumes.
