Hold UltraTech Cement: target of Rs 11000: ICICI Securities

Moneycontrol • 11 days ago

Original source

Key Investment Pillars

  • Volume growth: UltraTech Cement's Q2FY27 volumes rose 13% YoY, driven by a 13.8% increase in domestic sales. However, the analyst notes that demand may be challenged by potential drought impacts in several states.
  • Cost pressures: High operating costs, particularly fuel costs, offset the volume surge, leading to EBITDA being broadly in-line. The analyst expects cost pressures to continue in H2FY27.
  • Pricing: Pan-India average trade prices were stable QoQ, but the analyst notes that prices are dictated by elevated competitive intensity amidst a race for market share.
  • Capacity expansion: UltraTech Cement commissioned 4.6mtpa grinding capacity in September'26, taking total domestic capacity to 204.7mtpa, with plans to reach 240mtpa capacity.

Thesis Validation Checklist

  • Demand growth: Monitor rural demand, which may be impacted by deficient monsoons, and urban housing demand, driven by data centers, semiconductor projects, and infrastructure spend.
  • Cost management: Watch for the company's ability to manage cost pressures, particularly fuel costs, and its impact on EBITDA margins.
  • Pricing power: Observe the company's pricing strategy and its ability to maintain or increase prices in a competitive market.
  • Capacity utilization: Track the company's capacity utilization rates, which may impact operating leverage and profitability.