UltraTech Cement shares surge 3.4% on robust Q1FY20 results; should you buy or sell stock?

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Published: August 9, 2019 1:29:51 PM

The shares of cement manufacturing company UltraTech Cement soared more than 3 per cent after it reported robust Apr-Jun results. The company posted a 91 per cent increase in its net profits for the first quarter of FY20 on yearly basis.

UltraTech Cement, UltraTech Cement profits, UltraTech Cement revenue, interest, tax, depreciationUltraTech Cement shares surge more than 3 per cent on robust Q1FY20 results

The shares of cement manufacturing company UltraTech Cement soared more than 3 per cent after it reported robust Apr-Jun results. The company posted a 91 per cent increase in its net profits for the first quarter of FY20 against Rs 631 crore during the same period a year ago on the back of less operational costs and improvement in realisation. At 12:50 PM, UltraTech Cement shares were trading at Rs 4,320.90 per share, up 90 points from the last close. In view of the company’s stellar Apr-Jun results, Prabhudas Lilladher has maintained a BUY on the stock with a target price of Rs 5,175, and EV/EBITDA of 14x FY21E.

Led by the well-diversified regional presence, dominant size with a capacity of 112 million tonnes and market share of 22 per cent and highly efficient operations, UltraTech Cement remains the best candidate in cement sector to play Indian infrastructure and housing theme. High share of trade volumes and smooth integration of acquired assets would provide sustainability to the company’s margins, the brokerage firm noted. A consistent approach to trim cost along with a focus on improvement in return on capital employed or RoCE by balance-sheet deleveraging augurs well for the cement major, Reliance Securities said. The brokerage firm expects demand to recover post-monsoon followed by an increase in the government’s spending.

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“Considering Century Assets deal is almost through now, we factor in this into our estimates. Increasing our EBITDA estimate by 11%/13% for FY20E/FY21E, mainly to factor in superior realisation and additional sales volume from Century Assets, we maintain our BUY recommendation on the stock with a revised Target Price of Rs 5,100,” said Reliance Securities in a report.

Meanwhile, ICICI Securities has also maintained a BUY on UltraTech Cement stock. However, after factoring in higher debt, the brokerage house has reduced its target price to Rs 5,040 per share from the earlier Rs 5,200 per share. It has raised its FY20 revenue estimates by 4-7 per cent since the acquisition of Century Textiles’ cement assets would be consolidated for full year FY20 now versus earlier expectations of H2FY20.

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