Buy This Large-cap Cement Stock For Bullish Near-term Returns: Emkay Global Initiates Buy Call

Brokerage firm Emkay Global initiated a buy call for the stocks of UltraTech Cement, of the Aditya Birla Group for a 13.33% return in 1 year. Cement demand is expected to pick up in Q4, driven by a pick-up in government-led infra and housing projects, which will lead to more profitability for the cement company.

Target Price

The Current Market Price (CMP) of UltraTech Cement is Rs. 7,870. Emkay Global has estimated a Target Price for the stock at Rs. 8,750. Hence this company is expected to give an 11.2% return, in 1 year.

Stock Outlook
Current Market Price (CMP)	Rs. 7,870
Target Price	Rs. 8,750
1 year returns	11.20%

Company performance

UltraTech Cement's revenue was Rs. 4,47,258 mn in FY 21, which is expected to grow to Rs. 5,26,105 mn in FY 22. The company's EBITDA stood at Rs. 1,15,679 mn, which is expected to grow to Rs. 1,18,645 mn. Additionally, the company's adj. PAT stood at Rs. 55,809 mn, which is expected to grow to Rs. 60,520 mn. UltraTech Cement's 2.7% YoY to Rs. 509 crore, led by a faster recovery in acute and specialty segments. Revenue from India operations rose 4% YoY to Rs. 122bn. Grey cement realization increased by ~1% QoQ (+8% YoY), in line with Emkay's estimate.

Comments by Emkay Global

Maintaining a buy rating, Emkay Global said, the company's "Grey cement realization has increased by 1% QoQ in Q3FY22. Management remains confident of improvement in prices as demand is robust. Management said with capacity utilization crossing 85%, realization/margins will improve substantially. Average capacity utilization was 75% in Q3FY22, while it increased to 84% in Dec'21." Commenting on the company's upcoming projects, "Ultratech commissioned 1.2mt capacity in Oct'21 and 2mt, in Jan'22, taking its total domestic capacity to 114.6mt. It is likely to commission 4.1mt grinding capacity in H1FY23 and the balance 12.2mt in H2FY23."

About the company

UltraTech Cement Limited is the cement flagship company of the Aditya Birla Group. A $5.9 billion building solutions powerhouse, it is the largest manufacturer of grey cement, ready mix concrete (RMC) and white cement in India. It is the 3rd largest cement producer in the world, excluding China. UltraTech is the only cement company globally (outside of China) to have 100+ MTPA of cement manufacturing capacity in a single country. UltraTech has a consolidated capacity of 117.95 Million Tonnes Per Annum (MTPA) of grey cement. They have a market reach of more than 80% across India.

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Disclaimer

The above stock was picked from the brokerage report of Emkay Global. Investing in equities poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies, the author, and the brokerage house are not liable for any losses caused as a result of decisions based on the article.