Brokerages Raise Target Price For UltraTech Cement After Q2 Results

Analysts lauded UltraTech Cement Ltd.’s cost-saving measures and continuous deleveraging efforts as they raised target prices for the cement maker after the second-quarter results.

The company’s consolidated net profit stood at Rs 1,234.38 crore in the three months ended September, a 113% jump over the year-ago period, according to an exchange filing. Its net sales rose 8% to Rs 10,354 crore, while operating profit jumped to the highest since the first quarter of FY20.

Besides, UltraTech Cement managed to lower its net debt for the second straight quarter. Its consolidated net debt stood at Rs 12,132 crore for the quarter ended September compared with Rs 14,651 crore in the preceding three months.

That prompted most analysts to either maintain or upgrade their bullish investment recommendations on the stock. Of the 45 analysts tracking UltraTech Cement, 41 have a ‘buy’ rating, three suggest a ‘hold’ and the rest recommend a ‘sell’. The average of Bloomberg consensus 12-month target price implies an upside of 7.7%.

Shares of UltraTech Cement gained as much as 2.3% to Rs 4,735 apiece, before cooling off. That compares with the Nifty 50 Index’s 0.56% drop.

Here’s what brokerages have to say…

Credit Suisse

• Maintains ‘outperform’; raises target price to Rs 5,400 from Rs 5,000 apiece
• All round beat on volumes, realisation, and cash flows
• Cost reduction in focus, variable cost headwinds emerge
• Capex scale back to focus on execution
• Demand skewed towards trade channel; with non-trade picking
• Working capital control continued in Q2; Rs 2,500 crore net debt reduction

Macquarie Research

• Retains ‘outperform’; hikes target price to Rs 5,362 from Rs 5,200 apiece
• Rural demand remains strong
• Infrastructure improving and some green shoots in urban housing demand
• The company has taken some price hike in select regions in October 2020
• The cost will rise in the second half given higher input cost and normalisation of fixed cost

HSBC Global Research

• Upgrades to ‘hold’ from ‘reduce’; hikes target price to Rs 4,460 from Rs 3,660 apiece
• Q2 FY21 Ebitda significantly beat expectations
• The company delivered positive surprises across the board
• Operational and working capital efficiency led to cost reduction
• The company continues to deliver on deleveraging

Jefferies

• Maintains ‘buy’ and raises price target to Rs 5,600 from Rs 5,150 apiece
• Demand commentary was fairly strong led by ‘unprecedented’ rural consumption
• Q2 demand strong across regions except for south
• Raises EPS estimates by 5-30%, driven by a strong beat in Q2 and improving volume outlook

Investec Securities

• Maintains ‘buy’ and raises target price to Rs 5,500 from Rs 5,444 apiece
• The company’s operational beat is an interesting mix of solid volume growth
• Net cash by FY23, capital allocation priorities
• Favourable regional sales mix and reduced discounting aided pricing
• Remains constructive on cement; prefer for large caps