UltraTech Cement’s consolidated Ebitda at Rs 3,100 crore (down 6.4% YoY) for the first quarter was ahead of our/consensus estimates owing to better realisation and astute cost management. The cement maker is likely to sustain its industry-leading volume CAGR in the medium term, led by an increase of 19.9 mnte in capacity in phase-1 of the ongoing expansion plan by FY23, and by another 22.6 mnte by FY25-FY26.
We believe that UltraTech with its large diversified pan-India market presence, premium brand positioning, timely capacity creation and increased cost efficiencies is better placed to gain market share/improve margins. We broadly maintain our FY23E-FY24E EBITDA with the target price unchanged at Rs 8,500, based on 15x FY24E EV/E. We maintain the ‘buy’ call.
Revenue from India operations grew 29% YoY to Rs 14,500 crore. Volumes grew 17.4% YoY (down 9% QoQ) to ~24 mnte (83% utilisation vs 73% YoY), implying a 3-year volume CAGR of 6% versus the estimated industry CAGR of 4.5%. UTCEM expects cement demand to grow at ~8% CAGR over the next five years, led by recovery in urban housing and continued momentum in government infra spends and rural housing.
India operations Ebitda dipped 8% YoY to Rs 3,000 crore with Ebitda/te declining 22% YoY, but up 9% QoQ to Rs 1,247/te. Inflation in total cost/te was lower than our/consensus estimates at 5.7% QoQ and 21% YoY at Rs 4,828/te. This was primarily a result of effective cost management in fuel procurement.