UltraTech Cement is making most of sector wave
The robust Q4FY19 performance reported by the largest cement player UltraTech Cement (UTCL) resembled the dance of an elephant. Consolidated Ebitda at Rs 23.3 bn (up 31% y-o-y) beat our Rs 23.0 bn estimate (highest on the Street) as marginal revenue disappointment was offset by softer costs. Given recent improvement in the cement pricing scenario, we believe UTCL’s performance could improve further; factoring in the same, it is revised up FY20e and FY21e Ebitda 12% and 17%, respectively. However, under valuation framework (14x EV/Ebitda rolling over to Q2FY21e Ebitda) the stock offers limited upside (given the recent sharp run). Therefore, maintain Hold with revised TP of Rs 4,822 (Rs 3,971 earlier). We continue to stay positive on the cement sector factoring in the industry clinker utilisation up-cycle and maintain that UTCL will be its prime beneficiary. UltraTech Cement will be the beneficiary of strong demand growth momentum and rising clinker utilisations amidst tepid capacity additions.
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