Buy UltraTech Cement; target of Rs 8770: Motilal Oswal

Motilal Oswal is bullish on UltraTech Cement recommended buy rating on the stock with a target price of Rs 8770 in its research report dated dated July 22, 2021.

“India’s specialty chemicals industry is a decadal growth opportunity and it is still not too late to participate in the value creation process. We prefer CRAMS/CSM players Navin Fluorine (Navin) and PI Industries (PI) as they provide long-term earnings visibility. We also like UPL due to robust growth outlook and reducing debt concerns and SRF due to rising contribution from the chemicals business,” JM Financial research report.

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Motilal Oswal’s research report on UltraTech Cement

UltraTech Cement (UTCEM) continued to improve its costs and margins in 1QFY22; it reported the highest ever EBITDA/unit of INR1,536/t (+8% YoY) during the quarter. Coupled with volume growth of 47% YoY, this led to 59% YoY growth in EBITDA. Net debt fell INR7b QoQ to INR59.8b (0.44x TTM EBITDA). Market share gains should continue, aided by the ongoing 20mtpa expansion program, which should drive a 13% volume CAGR over FY21–24E. We raise our EPS for FY22E/FY23E by 6%/6%, factoring in a better realization outlook. We estimate a 26% EPS CAGR over FY21–23E.

Outlook

The valuation is reasonable at 13.7x FY23E EV/EBITDA – a 10% discount to its last five years’ average. We value UTCEM at 16x FY23E EV/EBITDA to arrive at TP of INR8,770. Reiterate Buy.

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