UltraTech Cement Ltd, India’s largest cement manufacturer, has experienced a notable 29% increase in its share price over the past year. Despite trading close to its 52-week high, analysts predict further upside potential.
The robust demand for cement in the country has contributed to positive growth for all cement manufacturers, with UltraTech benefiting from consistent volume growth. Ongoing capacity expansions undertaken by the company have resulted in a continual gain in market share. Additionally, the decline in raw material prices has bolstered UltraTech’s earnings outlook. Analysts foresee a promising future for the company, anticipating more upside potential for its stock.
Motilal Oswal Financial Services analysts project a potential upside of over 15%, suggesting a target range of ₹8,736 to ₹10,100 for UltraTech’s current stock levels.
According to Motilal Oswal, UltraTech is strategically positioned to capitalize on the expanding cement demand. The company aims to elevate its domestic grey cement capacity to 182 million metric tons per annum by the estimated fiscal year 2027. Analysts at Motilal Oswal view the company’s capacity compound annual growth rate (CAGR) of 9.5% from FY23 to FY27 as encouraging, maintaining UltraTech Cement’s leadership position in the industry.
The persistent strength in cement demand, fueled by government infrastructure spending and increased real estate activities, continues to drive growth. Cement demand has remained robust post-COVID-19, demonstrating a CAGR of 9% from FY21 to FY23. Analysts anticipate a sustained demand momentum, projecting a 7-8% CAGR through FY28, resulting in a demand of 575 million metric tons by that fiscal year.
UltraTech Cement is actively prioritizing its environmental, social, and governance (ESG) goals. The company is increasing its use of alternative raw materials, leading to a reduction in the clinker factor. Furthermore, UltraTech is making significant investments in renewable energy, with plans to reach 465MW in waste heat recovery system capacity and 1.5GW in solar and wind capacities by FY27. The goal is to surpass 60% green energy usage by the end of FY27, compared to the current 22%.
Motilal Oswal Financial Services analysts estimate a CAGR of 10%, 19%, and 29% in consolidated revenue, EBITDA, and adjusted net profit for UltraTech from FY23 to FY26. This growth is attributed to higher sales volume, cost savings, and reduced interest and tax expenses. The analysts also anticipate an improvement in return on equity (ROE) and return on capital employed (ROCE) to 15% and 14%, respectively, by FY26, up from 10% and 9% in FY23. UltraTech’s positive earnings trajectory, strong return ratios, and leadership position are expected to justify higher stock multiples.
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