CLSA has placed UltraTech Cement at the centre of its latest India materials coverage with a high-conviction ‘Outperform’ call, setting a target price of Rs 13,800 per share which implies about 15% upside. The brokerage says the company closed the year on a strong footing with better-than-expected fourth quarter numbers, driven by higher volumes and improved operating performance.
The brokerage added that risks from the Middle East conflict could weigh on costs in the near term. Moreover, sustained efficiency gains and scale give UltraTech Cement the ability to absorb pressures.
CLSA pointed out that capacity-led expansion and margin gains to push earnings before interest, taxes, depreciation and amortisation growth into the mid-to-high teens over the medium term, while maintaining a positive stance on cash generation and dividends.
CLSA on UltraTech Cement: ‘Outperform’
CLSA reiterated its high-conviction outperform stance on UltraTech Cement after the company reported a strong March-quarter performance that exceeded expectations on both volume and profitability.
The brokerage noted that earnings before interest, taxes, depreciation and amortisation rose to Rs 3,900 crore in the fourth quarter of financial year 2026 from the year-ago period, marking a 35% increase, supported by volume growth and lower operating costs. Domestic volumes grew 9% year on year during the third quarter, ahead of the broader industry growth of 6% to 7%, reinforcing the company’s market position.
“Ultratech delivered strong fourth quarter results with volume up 9% year on year and earnings before interest, taxes, depreciation and amortisation per tonne of Rs 1,192, both beating our estimates,” CLSA stated.
The brokerage pointed out that the company has maintained its industry growth guidance of 7% to 8% for FY27 and beyond, while targeting double-digit volume growth for itself. This gap between company growth and industry growth suggests continued market share gains.
Realisation trends also remained supportive. While like-for-like average selling prices rose 2.3% sequentially, reported realisations improved further due to brand conversion of acquired assets, which helped lift blended pricing.
According to CLSA, this combination of scale, pricing discipline and cost control puts UltraTech in a favourable position as it enters the new financial year.
CLSA on UltraTech Cement: Margins and cost pressures
Despite the strong operating momentum, CLSA flagged near-term risks from the ongoing Middle East conflict, particularly through higher packaging costs and currency volatility. Even so, the brokerage maintains that the company is well placed to manage these headwinds.
India profitability improved to Rs 1,192 per tonne in the fourth quarter from Rs 1,017 per tonne in the third quarter. CLSA estimated that without the impact of the Middle East situation, profitability would have reached Rs1,240 per tonne, indicating underlying strength in operations.
“While an extended Middle East conflict could weigh on profitability in the near term, sustained cost efficiency leaves the company better positioned to absorb such,” CLSA adds.
The brokerage highlights that cost-saving initiatives are already yielding results. UltraTech has achieved Rs 185 per tonne in efficiency gains so far against its stated goal of Rs300 per tonne, and it expects to exceed this target over time.
Acquired assets are also contributing to margin improvement. Profitability at India Cements and Kesoram operations has picked up, strengthening the overall earnings profile.
However, CLSA does caution that cost pressures could persist if geopolitical tensions continue. It expects some increase in power costs during the first quarter, with a larger impact likely in the second quarter if the situation does not ease. Packaging expenses and foreign exchange movements remain key variables to watch.
Even then, the brokerage believes price increases taken so far in cement are likely to offset a significant part of these cost pressures, keeping margins relatively stable.
Looking ahead, CLSA estimates India profitability at Rs1,153 per tonne for FY27 and Rs1,309 per tonne for FY28, with both volume and earnings before interest, taxes, depreciation and amortisation per tonne expected to grow at a compounded annual rate of 8% through FY26 to FY29.
CLSA on UltraTech Cement growth outlook and expansion
CLSA explained its positive stance on UltraTech around its aggressive capacity expansion plans and the demand outlook for cement in India.
The brokerage expects capacity-led growth to drive volume expansion over the next few years, supported by infrastructure spending and housing demand. UltraTech’s scale advantage and distribution network are seen as key strengths in capturing this growth.
“We expect capacity-led volume growth and margin improvement to drive mid-to-high-teen earnings before interest, taxes, depreciation and amortisation growth over the medium term,” CLSA adds.
The company plans to invest around Rs 10,000 crore annually in capital expenditure over the next few years, aimed at expanding capacity and strengthening its market leadership.
CLSA noted that despite this elevated investment cycle, UltraTech is expected to generate strong cash flows. This allows the company to maintain a healthy balance between growth spending and shareholder returns.
The brokerage also pointed to improving return ratios over time. Return on equity is projected to rise from 11.3% in financial year 2026 to 17.0% by financial year 2029, supported by earnings growth and better asset utilisation.
Revenue is expected to grow to Rs 1,01,160 crore in FY27 from Rs 87,383 crore in FY26, with further increases to Rs 1,21,282 crore by FY29.
Earnings per share are projected to rise to Rs 331.7 in FY27 from Rs 282.3 in FY26, and further to Rs 508.1 by FY29, indicating sustained earnings momentum.
CLSA on UltraTech Cement dividend and cash flows
Alongside growth, CLSA emphasised on UltraTech’s ability to return cash to shareholders through dividends, even during a heavy investment phase.
The company had announced a dividend of Rs 240 per share, and CLSA expects payouts to remain strong given robust cash generation.
“Ultratech intends to spend Rs 10,000 crore in capital expenditure annually over the next few years and would still generate strong cash flows to pay high dividends,” CLSA said.
The brokerage highlighted that the company has already invested Rs 800 crore in wire capacity and expects commissioning by early third quarter of FY27, which will add to its revenue streams.
Free cash flow generation remains a key part of the investment case, with CLSA expecting strong cash flows to continue as margins improve and volumes grow.
This balance between expansion and shareholder returns is seen as a positive, especially in a sector where large capital outlays are common.
CLSA on valuation and target price
CLSA revised its target price on UltraTech to Rs 13,800 from Rs 14,000 earlier, factoring in near-term cost pressures and a higher dividend payout.
Even after this adjustment, the brokerage maintains a high-conviction outperform rating, indicating strong confidence in the company’s medium-term prospects.
“We reiterate our high-conviction outperform rating and adjust our target price from Rs14,000 to Rs13,800,” CLSA said.
The brokerage has trimmed its FY27 earnings before interest, taxes, depreciation and amortisation estimate by 3% due to cost pressures linked to the Middle East situation, while keeping FY28 estimates unchanged.
Valuation multiples are expected to moderate over time as earnings grow. The stock trades at 42.5 times price-to-earnings for FY26, which is projected to ease to 23.6 times by FY29.
Enterprise value to earnings before interest, taxes, depreciation and amortisation is also expected to decline from 21.4 times in FY26 to 13.2 times by FY29, reflecting improving earnings.
CLSA believes that the combination of earnings growth, margin expansion and cash flow generation supports the current valuation and leaves room for upside.
Conclusion
CLSA’s latest report positions UltraTech Cement as a strong performer within the materials space, backed by steady demand, disciplined execution and ongoing expansion. While near-term risks from global developments remain, the brokerage sees these as manageable given the company’s scale and efficiency gains.
Disclaimer: While this report highlights a specific price target and an “outperform” rating from CLSA, it is for informational purposes only and does not constitute a solicitation or offer to buy or sell securities. Investing in equities involves market risks, including volatility and geopolitical sensitivities; please consult a SEBI-registered investment advisor before making any financial decisions. The views expressed are based on third-party brokerage analysis and do not necessarily reflect the editorial stance of this publication. This disclaimer has been generated using AI to support user well-being and responsible content consumption.