Prabhudas Lilladher is bullish on Ultratech Cement has recommended buy rating on the stock with a target price of Rs 4350 in its research report dated May 21, 2020.
Prabhudas Lilladher's research report on Ultratech Cement
UTCEM reported Q4FY20 earnings in line with our and consensus estimates. It underperformed industry with sharper fall in volumes. However, we believe that it was calculated move to sacrifice volumes in order to expand realisations of Century cement through gradual migration to Ultratech brand. Century cement's realisations improved by Rs160/t with shift to Ultratech brand. Management expects Century cement's margins to increase to Rs800-900/t from current Rs575/t (+2.2x QoQ) with targeted 85% shift of volumes to Ultratech brand and lower operational costs.
Outlook
We remain bullish on UTCEM due to its well-diversified regional presence, dominant size (with capacity of 117mnt and market share of 22%) and highly efficient operations. Tight price discipline and lower costs would significantly lessen the impact of tepid demand due to Covid-19 outbreak. We reiterate BUY with TP of Rs4,350, EV/EBITDA of 14x FY22E.
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