Ultratech Cement posted strong revenue and profit in Q1, driven by double-digit volume growth and lower costs. However, declining prices were a concern due to erratic cement pricing across the country. The management expects subdued demand this fiscal year but does not anticipate a prolonged slowdown.
UltraTech Cement shares rose as much as 2.38 per cent to Rs 10,200 apiece on the BSE.
UltraTech Cement Q4 results were announced on Monday and the stock had ended 2.7% higher during the session. The country’s largest cement manufacturer reported strong earnings for January-March quarter as its consolidated net profit rose 36% to ₹2,258 crore from ₹1,666 crore year-on-year (YoY), beating estimates, led by a decline in fuel costs and double-digit volume growth.
The company’s consolidated revenue from operations in Q4FY24 increased 9.4% YoY to ₹20,419 crore.
At the operating level, EBITDA was at ₹4,250 crore, with a margin of 20.81%.
“The company’s imported fuel consumption cost during Q4FY24 was 13% lower than Q4FY23, and it remained flat QoQ. Effective capacity utilization was 98% during the quarter and 85% for the full year,” UltraTech said in a statement.
Going forward, the demand for cement across all sectors continues to remain robust, which augurs well for the company, it added.
What Should Investors Do?
UltraTech Cement reported an extremely good set of results as reported EBITDA came in 11 per cent ahead of estimates. Contrary to some of the other peer companies which have reported numbers as of now, Ultratech’s EBITDA/mt was flat on QoQ basis compared to our estimate of ₹150/mt drop. Better than expected blended realizations (owing to higher RMC revenue) and improved costs resulted in an earnings beat, Centrum Broking said.
It believes Ultratech Cement is likely to strengthen its numero uno position through better market share and industry-leading profitability.
The brokerage maintained an ‘Add’ rating on the stock and raised UltraTech Cement’s share price target to Rs 11,200 from Rs 10,550 earlier.
Nomura maintained a buy rating and raised the target price by 20 per cent to Rs 12,000. Ultratech aims to achieve a cement capacity of 200MT or more, with a projected growth to 183MT (excluding Kesoram) by FY27, representing a 9 per cent CAGR from FY24-27. Phase 3 expansion plans include adding 22MT capacity at USD72/t with an estimated IRR of 15 per cent. The company awaits regulatory approvals for the acquisition of Kesoram, which is expected to be completed by March 2025, taking Ultratech’s capacity to over 190MT by FY27F. The management is confident about achieving the 200MT capacity organically.
Despite recent price increases, lower consumption in the election quarter may lead to moderated prices, with a projected 1% sequential decline in blended realisation. Volume moderation in the election quarter may result in 7 per cent higher fixed costs in 1QFY25F, leading to an expected moderation in EBITDA/t to Rs 1,080/t in 1QFY25F.
Jefferies said Ultratech’s performance in the fourth quarter surpassed expectations, with EBITDA growing by 24 per cent YoY and 26 per cent QoQ. This was despite weak prices being balanced out by slightly better volumes (+11% YoY), increased other operating income, and reduced overheads.
The management emphasised targeted cost savings of Rs 200-300 per ton in the medium term to drive profitability. We have adjusted our FY25 EBITDA estimate downward by 2 per cent, but maintain our FY26 estimates. This adjustment is due to our revised expectation of flat price growth YoY (previously estimated at +1-2 per cent YoY), anticipating margin expansion in FY25 as cost-saving initiatives from the second half of FY24 continue into FY25.
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