Unlocking UltraTech Cement: Profits Surge Amidst Stock Struggles; Analysts Predict Price Hike and Expansion Opportunities

UltraTech Cement recently showcased impressive financial results for the March quarter, yet its stock experienced a dip. On Tuesday, shares of UltraTech Cement dropped nearly 2%, despite the company reporting a 10% increase in net profit year-on-year, reaching Rs 2,482 crore, along with a 13% rise in revenue to Rs 23,063 crore.

Investors had high expectations, which the market had seemingly factored in. Analysts noted that disappointing operating margins and stagnant profitability per tonne (EBITDA/t) left minimal room for positive surprises. Coupled with the ongoing fluctuations in cement prices, many investors opted to secure their profits.

Broker Insights on UltraTech Cement

Motilal Oswal’s Optimistic Outlook

Brokerage firm Motilal Oswal maintains a positive stance on UltraTech Cement, reaffirming its ‘Buy’ rating with a target price set at Rs 13,900.

The firm forecasts impressive growth rates of 15% in consolidated revenue, 29% in EBITDA, and 34% in PAT from FY25 to FY27, attributing this growth to inorganic expansions.
UltraTech is expected to thrive due to a surge in infrastructure demand, improved pricing strategies, and an expanding operational scale. Recent acquisitions, including Kesoram and India Cements, are already enhancing the company’s performance.

In addition, Motilal Oswal predicts that UltraTech’s net debt will decline to Rs 105.3 billion by FY27, down from Rs 176.7 billion in FY25, thus enhancing its financial stability.

JM Financial’s Strong Recommendation

JM Financial has also shown confidence in UltraTech, labeling it a top pick in the cement sector. The brokerage raised its price target to Rs 13,500 from a previous Rs 13,000, based on a valuation of 19x FY27E EV/EBITDA.

According to their analysis, UltraTech is set for significant improvements in return ratios over the next 3-4 years due to increasing asset turnover, low expansion costs, and enhanced profitability.
In FY25 alone, UltraTech expanded its grey cement capacity by 43 million tonnes, with plans to boost this by another 27 million tonnes by FY27, bringing its total domestic capacity to 211 million tonnes.

JM Financial believes that these capacity enhancements and anticipated cost efficiencies—projected at Rs 300/tonne—will significantly bolster profitability and market share.

Nuvama’s Cautious Stance

On the other hand, Nuvama adopts a more cautious perspective on UltraTech Cement. While acknowledging the company’s robust volume growth and effective execution, it has maintained a ‘Hold’ rating due to concerns over high valuations.

Nuvama slightly increased its target price to Rs 11,859 from Rs 11,574, valuing the stock at 18x FY27 EV/EBITDA.
The brokerage highlighted potential risks, such as a drastic drop in cement prices or rising input costs, which could adversely affect profit margins.

Conclusion

As UltraTech Cement continues to navigate its financial landscape, market analysts present varied perspectives. While some see potential for growth driven by strategic expansions and operational efficiencies, others urge caution due to current valuations and market volatility. Investors should weigh these insights carefully as they consider their positions in this leading cement manufacturer.