Unraveling the UltraTech Cement enigma: High profits, faltering shares; Experts anticipate price increases, growth via expansion
Let's dish the tea on UltraTech Cement's latest financial performance and its impact on the stock market!
UltraTech Cement turned in a solid March quarter performance, with a 10% year-on-year increase in net profit to a whopping Rs 2,482 crore and a 13% rise in revenue to Rs 23,063 crore. But, the stock price? It tumbled nearly 2% on Tuesday.
Why so grim, you ask? Well, the market had already anticipated fantastic numbers, leaving not much room for surprise. Analysts noticed the muted operating margins and flat profitability per tonne (EBITDA/t), which left little wiggle room for a shocker. And the volatile cement prices, along with investors cashing in their profits, sealed the deal.
Let's delve into the brokerage firms' views on UltraTech Cement:
Motilal Oswal: Always a Buy
The ever-optimistic Motilal Oswal remained unfazed and reiterated its "Buy" rating with a target price skyrocketing to Rs 13,900. The brokerage is hopeful about a compound annual growth rate (CAGR) of 15%/29%/34% in consolidated revenue/EBITDA/PAT through FY27, fueled by acquisitions (like Kesoram and India Cements) and robust expansion.
Nuvama: Slightly Less Bullish
Nuvama, although maintaining a "Hold" rating, recognized our company's impressive volume growth and execution. However, the brokerage expressed concerns about high valuations that could potentially limit upside potential. They went ahead and slightly hiked their target price to Rs 11,859, valuing the stock at 18x FY27 EV/EBITDA.
JM Financial: All-Star in the Cement Game
JM Financial is all about UltraTech, naming it the sector's top pick. They bumped up their price target to Rs 13,500 (from Rs 13,000) based on 19x FY27E EV/EBITDA. They reckon our company's growing capacity, cost efficiencies, and improved profitability will boost both market share and profitability.
In a nutshell, although we've been slaying our expansion goals, our valuations may limit our stock's upside potential. But don't worry, our aim remains squarely on capturing the booming Indian infrastructure and housing markets by investing heavily in strategic diversifications and operational optimizations. Watch out for our foray into wires and cables, as well as our full-stack homebuilding initiatives!
Bye for now, folks! Make sure to tune in for more updates on our fascinating UltraTech journey. 😉
P.S. We're potentially looking at moderate price increases due to cost pressures, higher volumes, and sector trends, but it's not the main focus – we're all about that volume-driven growth!
- Despite reporting a significant 10% year-on-year increase in net profit and a 13% rise in revenue for the March quarter, UltraTech Cement's stock price experienced a 2% decline on Tuesday.
- The muted operating margins, flat profitability per tonne, volatile cement prices, and investors cashing in profits contributed to UltraTech Cement's stock price drop.
- Motilal Oswal remains optimistic about UltraTech Cement, maintaining a "Buy" rating and increasing its target price to Rs 13,900, predicting a CAGR of 15%/29%/34% in consolidated revenue/EBITDA/PAT through FY27.
- Nuvama, while maintaining a "Hold" rating, acknowledges UltraTech Cement's impressive volume growth and execution but expresses concerns about high valuations that could limit upside potential, setting a target price of Rs 11,859.
- JM Financial regards UltraTech Cement as the sector's top pick, bumping up its price target to Rs 13,500 and valuing the stock at 19x FY27E EV/EBITDA, based on growing capacity, cost efficiencies, and improved profitability.
- UltraTech Cement is planning strategic diversifications and operational optimizations to capture the booming Indian infrastructure and housing markets, with potential forays into wires and cables and full-stack homebuilding initiatives.
- UltraTech Cement is considering moderate price increases due to cost pressures, higher volumes, and sector trends, with the main focus remaining on volume-driven growth.
