Is UltraTech Cement a buy after Q4FY23 earnings? Here is what the brokerage has to say

The company on Friday announced its financial results for the January-March quarter of FY2023 (Q4FY23). Consolidated net profit for the quarter was 1,665.95 crore, down 36% from 2620.43 crore in the prior-year period.

UltraTech Q4 results: Stock trades flat ahead of numbers

The company said in an exchange filing that its energy costs increased 17% year over year and decreased 4% quarter over quarter.

Coal and pet coke prices increased by 18% year-on-year (YoY). Raw material cost increased by 9% as a result of increase in cost of fly ash, slag and other raw materials.

Consolidated revenue from operations up 18.4% in Q4 FY23 18,662.4 crore, higher than the cement giant’s reported figure 15,767 crore for the same quarter in FY22.

UltraTech Cement Q4FY23 Results: Net profit down 36%, dividend declared

Meanwhile, the company reported strong consolidated sales volume growth in the March quarter (Q4FY23) at 30.5mt with domestic sales at 31.7 million tonnes (mt). This year-on-year (YoY) growth rate was around 15%. Market share growth for UltraTech was fueled by strong demand and increased capacity, which led to increased volumes. In Q4 and for full FY23, the cement capacity utilization stood at 95%.

Company shares on Friday 7,554.60 per share, 0.7% or 53.35.

Brokerage firms have shared their ratings and views on the stock in response to the cement major’s Q4FY23 earnings results. Let us see what suggestions he has given.

UltraTech Cement Q4 results: Firm declared dividend, check details here

ICICI Securities Limited

As per the brokerage’s analysis, the company had a strong fourth quarter with volume growth of over 14% in Q4 FY23, a realization decline stalled at just under 1% QoQ, over 3% convertible ton Cost reduction QoQ, and a moderate increase in fixed costs of only 5.5% YoY/3% QoQ.

As a result, the company’s consolidated earnings before interest, tax, depreciation and amortization (EBITDA), which is 33.2 billion, 4% above expectations. Blended EBITDA/tonne was Rs. 1,048, exceeding expectations by over 4%.

“Nevertheless, we see limited scope to raise our earnings forecast. Despite easing fuel costs, we maintain that downside risks to consensus estimates exist given the weak cement pricing environment. In addition, continued industry-wide capacity addition and aggressive expansion preponderance by Adani Group precludes an upward revision in our valuation multiple. We continue to value the company at 15 times FY25E EV/EBITDA with an unchanged target price of Rs. with ‘Hold’ rating. 7,295,” the brokerage said in its report.

Phillip Capital (India) Private Limited

According to the brokerage, despite its sheer size and unmatched systemic approach, UltraTech Cement is the only company in the market where the brokerage house has received consistent on-the-ground feedback regarding fair business practices. It believes its Q4 data accurately reflects the essential results of best-in-class vigilance.

“We do not expect any major downside risks to our estimates, and maintain ‘buy’ with the previous target price 9,200,” the brokerage said.

Daulat Capital Market Private Limited

The company’s capacity will increase from 120 million tonnes per annum (mtpa) in FY22 to 136.7 or 160.5 mtpa in FY23 or FY25-26. In the Q1FY24 earnings call, the cement major will discuss the next phase of expansion after the current 22.6 mtpa (Phase 2) project.

To support future expansion, it has already drawn up plans to ramp up the capacity to 200 MTPA by FY29. Healthy operating cash flow and free cash flow will continue to exist, resulting in further deleveraging.

“The company’s biggest advantage is being the largest player in the Indian cement industry. However, the current market price leaves limited upside, thus we maintain ‘accumulated’ with a revised target price of 8,552 based on 16 times consolidated FY25E EV/EBITDA,” the brokerage said.

Elara Securities (India) Private Limited

“We remain positive on the company’s volume prospects in the coming quarters given the increasing capacity and access to improved demand. While range-bound volatility in cement prices remains a challenge, reduction in fuel prices and UTCEM’s cost-saving measures Margins should be under control. Thus. , we reiterate ‘Accept’ and broadly retain our earnings estimates for FY24 and FY25. We rollover from December 2024E to March 2025E and thus, Our target price has been raised from 8,638 8,325 based on 15.5 times (unchanged) FY25E EV/EBITDA,” the brokerage said.

UltraTech’s valuation may get a volume push