Brokerages Hike UltraTech Cement Stock’s Target Price Despite Q2 Miss

Most analysts hiked their target for UltraTech Cement Ltd. stock price anticipating a pickup in demand after heaviest monsoons in 25 years.

The Aditya Birla Group company’s quarterly profit rose 72.3 percent over the previous year, missing estimates while volumes dropped 1 percent year-on-year to 17.2 million tonnes.

Meanwhile, analysts remained cautious on UltraTech’s turnaround plan for the newly acquired Century Textiles & Industries Ltd. plants by next fiscal.

Here’s what the brokerages have to say about UltraTech’s second-quarter performance:

Morgan Stanley

• Maintain ‘Overweight’ rating; hiked target price to Rs 5,000 per share from Rs 4,760.
• Management expects turnaround in Century unit over six-12 months.
• Century to break even in profit-before-tax over 12 months.
• Expect volume growth to improve in second half of fiscal.
• Announcement of expansion plans in east India surprising.

HSBC

• Maintain ‘Reduce’ rating with target price unchanged at Rs 3,520 per share.
• Standalone performance (barring Century unit) was weaker than expected.
• Century unit’s Q2 performance was disappointing.
• Century plants running at 48 percent capacity in Q2FY20 vs 64 percent in previous year.

CLSA

• Maintain ‘Buy’ rating; target price hiked marginally to Rs 5,500.
• Good second-quarter results but Century Textiles’ unit makes comparison difficult.
• Deleveraging is key; despite which expansion of 3.4 million tonne capacity approved in east India.
• Don’t see concern for balance sheet given strong profitability trend.
• Century’s unit Ebitda guidance of Rs 400-500 per tonne for second half of fiscal looks conservative.

Citi

• Maintain ‘Buy’ rating; reduces target price from Rs 5,300 to Rs 5,130 due to uncertainty over Century business.
• Expect demand and price improvement after Diwali.