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Informist, Thursday, Sep 19, 2024

 

MUMBAI – HDFC Securities Ltd expects an improvement in UltraTech Cement Ltd's margin from 2025-26 (Apr-Mar) on the back of expected recovery in demand from Oct-Dec and the company's focus on reducing its operating expenditure by 300 rupees per tonne. The brokerage said expected gains from ongoing industry consolidation will also support the improvement in margin from 2025-26 (Apr-Mar). HDFC Securities said it retained its 'add' rating on UltraTech Cement with an unchanged target price of 11,260 rupees. 

 

HDFC Securities said UltraTech management expects cement demand to recover in Oct-Dec after a sluggish Jul-Sep and noted sales had contracted on year in August. The brokerage said pan-India average net sales realisation is expected to fall by 2% on quarter in Jul-Sep, pulling down margins, which are already under stress.

 

The brokerage said the company's organic expansion along with its acquisition of Kesoram Industries and India Cements will increase its consolidated capacity by 46% to 216 mln tn during 2024-25 (Apr-Mar) to 2026-27 (Apr-Mar). The company will likely invest 80-90 bln rupees per year towards organic expansion for the current and the next two financial years, HDFC Securities said. Through these investments the company will likely add 16 mln tn of capacity in the current financial year, 12 mln tn of capacity in 2025-2026 (Apr-Mar), and 15 mln tn of capacity in 2026-27 (Apr-Mar). Ultratech Cement also continues to expand its ready mix concrete business, which currently contributes 8% to the consolidated revenue and has been growing at a 25% compound annual growth rate. 

 

Although the brokerage expects an uptick in the company's margin after the next financial year, it has cut its estimates for the company's earnings before interest, tax, depreciation, and amortisation by 4% for 2024-25 (Apr-Mar) and 2025-26 (Apr-Mar). The brokerage said it has raised its estimate for the company's EBITDA by 4% for 2026-27 (Apr-Mar).

 

The brokerage said UltraTech plans to increase its cement to clinker ratio to 1.54 by 2026-27 (Apr-Mar) from 1.44 in 2023-24 (Apr-Mar). This will cut the company's cost by 60 rupees per tn. HDFC Securities said the company plans to raise its green power capacity to 40-45% in the current financial year from 24% in 2023-24 (Apr-Mar). It plans to expand its green power capacity to 60% by 2026-27 (Apr-Mar). This will cut the company's operating cost by 80 rupees per tn, the brokerage said. The company plans to cut its operating cost by 30 rupees per tn by increasing the thermal substitution rate to 15% by 2026-27 (Apr-Mar) from 5% in 2023-24 (Apr-Mar). The brokerage said it expects UltraTech's fuel cost to moderate after January 2025. The brokerage said the company's fuel cost will fall by 100 rupees per tn on year in 2024-25 (Apr-Mar) and 2025-26 (Apr-Mar) each.

 

The brokerage cut its estimate for the company's 2024-25 (Apr-Mar) net profit to 73.7 bln rupees from its earlier estimate of 78.2 bln rupees. The brokerage estimates UltraTech Cement will report revenues of 748.3 bln rupees in 2024-25, down from its earlier estimate of 756.1 bln rupees. It has also revised its estimate for the company's net profit for 2025-26 to 98 bln rupees from 104 bln rupees. The brokerage estimates UltraTech Cement will report revenues of 853.3 bln rupees in 2025-26, down from its earlier estimate of 866.5 bln rupees. It has also revised its estimate for the company's net profit for 2026-27 to 125.7 bln rupees, up from 119.9 bln rupees. It cut its estimate for the company's revenue in 2026-27 (Apr-Mar) to 960.7 bln rupees from 970.7 bln rupees.

 

UltraTech had reported a consolidated net profit of 16.97 bln rupees for the June quarter on revenues of 180.70 bln rupees. At 0944 IST, shares of Ultratech Cement traded at 11,724.15 rupees on the National Stock Exchange, up 0.8%.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Aman Aryan

Edited by Deepshikha Bhardwaj

 

 

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