UltraTech Cement Share Price: buy, sell or hold?

UltraTech Cement Share Price – The company expects cost inflation to peak and with demand pick up, all of this should fuel volume growth and improve margins in the fourth quarter.

Shares of UltraTech Cement fell 3 per cent to Rs 7,663.50 on BSE in intra-day trade on Tuesday, wiping off the previous full day’s gains as the company closed its dues for the October-December quarter (Q3FY22) due to higher cost pressures. Weak operating performance was reported.

Weak demand due to unseasonal rains and festive season. The cement major’s stock corrected 7 per cent from its record high of Rs 8,267 on November 8, 2021.

In Q3FY22, UltraTech’s revenue was up 5.4 per cent at Rs 12,471 crore year-on-year (YoY) on account of higher receipts, while earnings before interest, tax, depreciation and amortization (EBITDA) declined 24.6 per cent YoY to Rs 2,221 crore . EBITDA margin was 707 bps YoY, down from 470 bps QoQ at 17.8 per cent.

The company expects cost inflation to peak and with demand pick up, all this should fuel volume growth and improve margins after the January-March quarter (Q4FY22).

During the quarter, trade sales were more impacted than non-trade sales, as aggregate demand for cement remained lower.

However, with the onset of peak season and increasing construction activities, cement demand is expected to improve in Q4 due to a boom in government-led infrastructure and housing projects. Going forward, rural and urban demand is also expected to pick up. All this augurs well for the company, UltraTech said on an outlook.

The Board also approved capital expenditure of Rs 965 crore for capacity expansion and modernization at Birla White from the existing 6.5 LTPA to 12.53 LTPA in a phased manner. The company said the capacity expansion will help Birla White strengthen its presence in the growing white cement market, thereby reducing its dependence on high-cost imports.

An ICICI Securities analyst expects its capacity to grow at a CAGR of ~7.4 per cent to 131 MT by FY23 as against the industry average CAGR of 5.6 per cent during the same period. New organic capabilities are being added at a lower capital cost (US$60/t) which will help increase the return ratio (to generate an IRR of 16-18 per cent).

Despite capex plans, the company aims to become net debt-free by FY 2013E through strong operating cash flows (from existing and acquired assets) and efficient w/ cap management, the brokerage firm said in a ‘buy’ rating and target. maintain value. 9,300 per share on the share.

The demand for cement is expected to remain strong due to the government’s thrust on infrastructure development and the recent recovery in housing demand. UltraTech is well positioned to capture market share led by its strong distribution network.

Its capacity expansion plans and scope for improvement in utilization of existing capacities provide strong growth visibility. UltraTech plans to expand into the white cement segment, which will help drive growth in the segment. Management expects to achieve higher growth in the Construction Chemical segment,” said Motilal Oswal Financial Services. It reiterates ‘Buy’ rating on the stock with a target price of Rs 9,080 per share.

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