UltraTech Cement hits record high; gains 2% on strong sales volume in Q1

UltraTech's consolidated sales volume rose 19.6 per cent YoY at 29.96 mt, where domestic grey/white cement sales volume grew by ~20 per cent/11 per cent YoY, respectively.

Shares of UltraTech Cement hit a record high of Rs 8,499.70, up 2.5 per cent on the BSE in Monday’s intra-day trade after the company reported strong sales volume for the first quarter (April to June) of financial year 2023-24 (Q1FY24). The stock surpassed its previous high of Rs 8,429, touched on June 16, 2023.

UltraTech’s consolidated sales volumes were up 19.6 per cent year-on-year (YoY) at 29.96 million tons (mt), where domestic grey/white cement sales volume grew by ~20 per cent/11 per cent YoY, respectively. The company’s capacity utilization stood at around 90 per cent for the quarter.

Meanwhile, UltraTech is targeting strong growth across both its cement and non-cement businesses (white/putty, RMC and construction chemicals). Its ongoing initiatives to bolster green-energy usage, lead distance moderation and tailwinds of fuel cost reductions should drive a margin rebound.

Despite its large annual Capex estimate (Rs 6,000 crore each in FY24/25E), analysts at ICICI Securities estimate UltraTech’s balance sheet to turn net cash in FY25E. 

The recent correction in fuel prices (Pet Coke and Coal) bodes well for the company as it will aid in improving its margin, which will start flowing in from Q1FY24 and onwards.

With better capacity utilization, a better demand environment, and robust cost control, analysts at Axis Securities expect the company’s EBITDA margins to grow from 17 per cent in FY23 to 22 per cent by FY25E. Concurrently, its EBITDA/tonne would also improve by 30 per cent over FY23-25E to Rs 1,300/tonne.

The brokerage firm InCred Equities currently has an ADD rating on the stock with a target price of Rs 8,530. Ultratech remains one of our top picks in the large-cap space, given the visibility on volume and strong cost-control efforts. At CMP, the stock is currently trading at 15.2x EV/EBITDA and US$191 EV/t on our FY25F estimates, the brokerage firm said in stock update.