Q4FY23 Review: UltraTech Cement: Robust quarter; cost tailwinds ahead

2 May 2023 , 12:24 PM

UltraTech Cement’ (UTCEM) Q4FY23 EBITDA grew by 7% YoY and 46% QoQ to Rs 31.4 billion, driven by strong volume growth. In FY23 too, volumes grew 14% YoY and crossed 100mn MT (84% utilization). However, EBITDA fell 9% YoY (EBITDA/t down 20% YoY to Rs 977), as 7% price increase fell short of cost inflation. Going ahead, UTCEM remains confident of volume growth (12-13% YoY), but shared cautious commentary on profitability. 

UTCEM has added 11mtpa in H2FY23 and another 4mtpa will be added in Q1FY24 – this would ensure volumes grow 15% CAGR (1.5-2x of industry growth) over FY23-25. In addition to this, work on 22.6mtpa (17% of capacities) is progressing well and is likely to commission in FY25/26, taking UTCEM’s domestic capacity to 154mtpa. As such, management had shared their vision to be a 200mn MT company –plans for next phase of capacity additions to be soon unveiled. Growth plans are well supported by the company’s robust cash flows.

Analysts at IIFL Capital Services estimate its EBITDA to grow by 25% p.a., over FY23-25, driven by timely capacity additions and likely tailwinds from energy prices. At CMP, the stock trades attractively — analysts at IIFL Capital Services value it at 15x 2-year forward EV/EBITDA.