UltraTech Cement Maintains Price Target of Rs 13,800, Suggests Motilal Oswal

UltraTech Cement: Strong Growth Outlook Amidst Industry Expansion

Motilal Oswal's research team recently visited Ultratech Cement's (UTCEM) Baga plant in Solan, Himachal Pradesh, to gain insight into the company's operations and growth prospects. The visit provided an opportunity to interact with the management team and tour the plant, yielding key highlights that underscore the company's competitive position and future goals.

Notably, UTCEM boasts a market share of 31.4%, significantly surpassing its capacity market share of 27.8%. This impressive gap highlights the company's ability to effectively operate its capacity and capitalize on market opportunities. Furthermore, UTCEM has set ambitious targets, including an EBITDA per tonne of INR1,400 by 4QFY28 and a return on capital employed (ROCE) of over 15% by FY28.

The Indian cement industry is poised for growth, with demand expected to experience a compound annual growth rate (CAGR) of approximately 7% to 8% over the next few years. This expansion is expected to benefit UTCEM, as the company aims to increase its contribution from UBS stores to around 40% of total volume, up from the current 21%. This strategic move is likely to enhance the company's revenue and profitability.

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Valuation and Recommendation

The stock is currently trading at an enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA) multiple of 19x/15x for FY27E/FY28E, respectively. Motilal Oswal's research team values UTCEM at 18x FY28E EV/EBITDA, arriving at a target price of INR13,800. Based on this analysis, the team reiterates a BUY recommendation for the stock.