Ultratech Cement share price falls 2% but brokerages see up to 31% upside as Q1 earnings beat estimates

UltraTech Cement share price fell over 2 percent on Monday after the company reported a 6.8% decline in net profit at Rs 1,584 crore for the quarter ended June as against Rs 1,703 crore it recorded a year back.

Ultratech Cement share price falls 2% but brokerages see up to 31% upside as Q1 earnings beat estimates
So far in 2022, Ultratech Cement share price has tanked over 17%, underperforming benchmark Nifty 50 which has tumbled 5% YTD

UltraTech Cement share price fell over 2 percent intraday on Monday after the company reported a 6.8% decline in net profit at Rs 1,584 crore for the quarter ended June as against Rs 1,703 crore it recorded a year back. The largest cement manufacturer in India beat the street’s estimates for both the profit as well as its consolidated revenues. Ultratech Cement shares were trading at Rs 6,297.70 apiece on the BSE, down 2.43%. So far in 2022, Ultratech Cement share price has tanked over 17%, underperforming benchmark Nifty 50 which has tumbled 5% YTD. Analysts remain positive on the stock given the strong momentum in housing, and governments’ thrust on infrastructure and industrial development which is expected to give a boost to the cement industry in FY23. The scrip closed 1.29% down at Rs 6,371 per share on BSE.

Stock talk: Should you buy, hold or sell Ultratech Cement shares?

Motilal Oswal: Buy
Target price: Rs 7,210; Upside: 12%

Ultratech Cement’s capacity expansion plans, along with scope for an improvement in utilisation of existing capacities, offer strong growth visibility, according to analysts at Motilal Oswal. “We expect a growth of ~9% in sales volumes in FY23-24,” they said. Increase in WHRS/solar capacities along with scope for reducing lead distance is expected to help the Cement manufacturer structurally improve its cost structure. “Continuous improvement in leverage (to become net cash positive in FY24E v/s a net debt/EBITDA of 3x in FY19) will help it to pursue growth opportunities in the future. We expect it to trade at higher-than-historical multiples, given its leadership position and strong growth opportunities,” they added. The brokerage maintains a ‘buy’ rating on the stock with a target price of Rs 7,210, an upside of 12% from Friday’s closing price.

ICICI Securities: Buy
Target price: Rs 8,500; Upside: 31%

Analysts at ICICI Securities believe that Ultratech Cement is likely to sustain its industry-leading volume CAGR in the medium term, led by an increase of 19.9mnte in capacity in phase-1 of the ongoing expansion plan by FY23, and by another 22.6mnte by FY25-FY26. “We believe UTCEM – 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,” they said. The brokerage maintains its ‘Buy’ call on the stock with a target price of Rs 8,500 and reiterates that Ultratech Cement is its top pick in the sector. Lower demand/ prices, and higher costs remain the key risks.

Edelweiss: Hold
Target price: Rs 6,127; Downside: 5%

Edelweiss Securities retained sceptical view on the stock factoring in limited possibility of an uptick in FY24E earnings (downward risk to consensus); and persisting sector concerns of weak pricing power in the near term and uncertainty over medium term owing to entry of Adani Group (with aggressive expansion plans). The brokerage continues to value Ultratech Cement shares at 16x EV/EBITDA; a rollover to Q2FY24E yields. “While on-track capex plans (of 19.9mtpa in phase 1 and another 22.6mtpa in phase 2) and efficiency focus are heartening, the weak sector fundamentals hold us back from ascribing a higher valuation multiple to the stock,” it said. The brokerage maintains ‘Hold’ rating on the stock with a target price of Rs 6,127 apiece.

(The stock recommendations in this story are by the respective research analysts and brokerage firms. FinancialExpress.com does not bear any responsibility for their investment advice. Capital markets investments are subject to rules and regulations. Please consult your investment advisor before investing.)

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