Brokerages Remain Bullish On UltraTech Cement Despite Input Cost Pressure

Brokerages retained their rating on UltraTech Cement Ltd. after its second-quarter earnings met estimates.

Analysts, however, pointed out that higher input cost inflation, which will be fully reflected over the last quarter of the ongoing fiscal 2021-22 and the first quarter of the new financial year, would keep the profit flat in the near term. Price hikes could also be an important factor to watch.

• UltraTech's revenue rose 1.6% over the preceding quarter to Rs 12,016.8 crore in three months ended September. Analysts had projected Rs 11,758.6 crore.

• Profit, however, tumbled 23% sequentially to Rs 1,313.5 crore on higher expenses and lower other income. It, however, met estimates.
  
  Here's what brokerages made of UltraTech's Q2 earnings:

Nomura

• Maintains "buy" on the stock; target price retained at Rs 8,600.

• Q2 largely in-line, reported Ebitda boosted by higher other operating income.

• Volumes largely in-line; core blended realisation slightly higher.

• One-offs led to higher other and staff costs; variable cost increase was lower.

• Higher operational expenditure, flattish blended realisation led to sharp quarter over quarter margin contraction.

Macquarie

• Retains "outperform" rating; target price unchanged at Rs 8,542.

• Full impact of input cost inflation to be reflected over Q4 FY22E/Q1 FY23E.

• Demand is resilient; Ultratech will take price hikes to offset cost inflation.

• Cost inflation to be passed; balance sheet comfortable.