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Brokerages Remain Bullish On UltraTech Cement Despite Input Cost Pressure

Brokerages retained their rating on UltraTech Cement after Q2 earnings met estimates.

<div class="paragraphs"><p>The Supreme Court approved Binani Cement Ltd’s sale to UltraTech Cement Ltd.</p></div>
The Supreme Court approved Binani Cement Ltd’s sale to UltraTech Cement Ltd.

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.

CLSA

  • Maintains "outperform" rating; target price unchanged at Rs 7,399.

  • Q2 Ebitda largely in-line: company confident of passing on cost inflation.

  • Higher blended realisations offset cost increase.

  • Cost pressure to accentuate in 2H but Ultratech confident of passing it on.

  • Capacity expansion largely on track and debt rises marginally.

  • Well-placed in the current upcycle but price hikes key to out-performance.

Goldman Sachs

  • Maintains "buy" on stock; target price unchanged at Rs 8,950.

  • In-line results; energy cost to keep profits flat near-term.

  • Costs could keep profitability in-check over the near-term.

  • Profitability declined 17% quarter-on-quarter, as higher cash costs were partially offset by better realisations.

  • Bullish view driven by higher-than-industry volume growth, continued improvement in Ebitda per tonne.