UltraTech Cement Q3 Results: Analysts Remain Bullish; Laud Debt Reduction Effort

Most analysts maintained their bullish investment recommendation on UltraTech Cement Ltd. as the cement maker’s operational performance met estimates in the quarter ended December.

The company’s adjusted earnings before interest, tax, depreciation and amortisation stood at Rs 1,919.3 crore in the October-December period, 25 percent higher than last year, according to its exchange filing. Its net profit, too, rose 48.6 percent year-on-year to Rs 643.15 crore but missed estimates.

UltraTech cement also provided for a one-time expense of Rs 133.2 crore as part of other expenses against various disputed liabilities. And fall in costs and higher realisations offset lower sales volume during the period.

The analysts also lauded the company’s efforts to reduce its debt burden. The company’s debt stood at Rs 18,625 crore as of December 2019 compared with Rs 20,619 crore at the end of September.

Here’s what the brokerages have to say about UltraTech’s third-quarter performance…

Morgan Stanley

• Maintains ‘Overweight’ with a target price of Rs 5,350 apiece, implying a potential upside of 15 percent.
• Third-quarter earnings in line with estimates and commentary is encouraging.
• Sees sign of demand revival; cost discipline; and strong focus on deleveraging.
• Expects net debt-to-Ebitda to improve significantly over the coming years.

Phillip Capital

• Maintains ‘Buy’ rating with a target price of Rs 6,000 apiece, a potential upside of 29 percent from Friday’s close.
• No major surprises or disappointments on realisations/costs.
• Operations of Century Cement, which UltraTech acquired, remained a drag and may continue for a few more quarters.
• On-ground vigilance to drive the structural and sustainable delta to earnings.

HDFC Securities

• Maintains ‘Buy’ rating with a target price of Rs 5,600 apiece, a potential upside of 20 percent from Friday’s close.
• Despite lower volume, healthy pricing power and cost cool-off aided earnings.
• The company is stabilising costs and distribution of Century Cement and its Nathdwara unit
• The company deserves premium valuation for capacity and balance sheet discipline.

Prabhudas Lilladher

• Maintains ‘Buy’ rating and raises target price to Rs 5,110 apiece from Rs 4,675 a share.
• Increases Ebitda estimates by 8.1 percent/10.7 percent for FY21/FY22.
• Revision of estimates due to fast turnaround of Century Cement, backed by improvement in realisations and lower energy and logistic costs.
• UltraTech Cement is best candidate in cement sector to play Indian infrastructure and housing theme.
• Ebitda per tonne of merged plants of Century Cement would cross Rs 1,000 by first quarter of FY21.
• Not interested in acquiring Emami Cement due to clinker cement capacity mismatch.