Ultra-Tech Cement Stock Increase 68%: Q3 Earnings, Stock Analysis”

UltraTech Cement, India’s largest cement manufacturer, reported a 68% year-on-year jump in consolidated net profit to Rs 1,777 crore for the December 2022 quarter. This robust performance was driven by higher volumes, better realizations, and lower costs. In this analysis, we take a closer look at UltraTech Cement’s latest financials, stock performance, valuation and growth outlook to determine if it presents a good buying opportunity for investors at current levels.

Overview of UltraTech Cement’s Stock Market Performance

UltraTech Cement Ltd (ULTRACEMCO) is listed on the NSE and BSE in India. As of January 19, 2024, the stock closed at Rs 9,808.45 on the NSE, which is 6.82% below its 52-week high of Rs 10,526 hit on December 29, 2023.

With a market capitalization of Rs 2.83 lakh crore, UltraTech Cement is among the top 5 companies by market cap on the NSE. Its current price-to-earnings ratio stands at 49.72, higher than the industry average of around 30. The company’s earnings per share is Rs 197.39.

Detailed Performance Analysis for Q3 FY2024

In Q3 FY24, UltraTech Cement’s consolidated net sales grew by 8% year-on-year to Rs 16,487 crore compared to Rs 15,299 crore in Q3 FY23. Higher volumes and better realizations drove this growth.

EBITDA jumped 38% YoY to Rs 3,395 crore while EBITDA/tonne for India operations rose 34% YoY to Rs 1,208. This sequential expansion in margins was due to lower raw material and fuel costs.

The company’s grey cement sales volume increased 5% YoY and white cement sales were up 18% YoY during the quarter.

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UltraTech Cement’s Share Price and Valuation

UltraTech Cement’s share price has rallied over 55% in the last 1 year. The stock hit its 52-week high of Rs 10,526 in December 2022 but has corrected nearly 7% since then.

At the current market price of around Rs 9,800, UltraTech Cement is trading at a P/E ratio of 49x its trailing 12 months earnings. This valuation is at a premium to its 5-year average P/E of around 41x.

UltraTech Cement’s Consolidated FY2023 Financial Performance

For the full financial year 2022-23, UltraTech Cement reported:

  • Consolidated Revenue from Operations: Rs 36,644 crore, up 20% YoY
  • Net Profit: Rs 3,940 crore, down 10% YoY
  • Total Assets: Rs 1,06,669 crore
  • Total Liabilities: Rs 60,029 crore
  • Shareholders’ Equity: Rs 46,640 crore

What is the Future Outlook for UltraTech Cement Stock?

According to analysts, UltraTech Cement’s stock price could rise to the range of Rs 10,500 – Rs 11,500 over the next 12 months. This points to a potential upside of 7% to 18% from current levels.

In the long run, UltraTech Cement is well-placed to benefit from India’s growing cement demand. However, margin pressure from rising fuel costs poses a key risk. Competitive intensity in the sector is also high.

Key Drivers of UltraTech’s Strong Q3 Performance

The 68% YoY growth in net profit to Rs 1,777 crore was UltraTech’s highest-ever quarterly net profit. It also beat analyst estimates by a wide margin.

Higher volumes, better realizations, and reduction in fuel and power costs aided the bumper earnings. Operating leverage also kicked in with higher utilization.

UltraTech Cement’s Margins Show Slight Improvement

While fuel and power costs are rising, UltraTech Cement’s EBITDA/tonne rose 34% YoY in Q3 FY24 on better realizations and lower raw material costs. This indicates some improvement in margins.

However, margin pressure could re-emerge if the recent spike in energy costs is sustained.

Is UltraTech Cement Stock a Good Buy Now?

UltraTech Cement remains well-positioned to cater to India’s cement demand given its pan-India presence and strong brand. Its Q3 results reaffirm its growth and profitability prospects.

However, the valuation seems stretched at around 50x trailing earnings. Investors with a high-risk appetite can consider buying on 10-15% corrections. Others should wait for a better entry point.

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