Buy UltraTech Cement: target of Rs 5100: ICICI Securities

ICICI Securities research report on UltraTech Cement

UTCEM is likely to be the key beneficiary of expected demand recovery post monsoon, given its low utilisation vs larger peers especially in North / Central regions and expected demand improvement in South / West regions from H2FY21E. Acquired assets of Binani and Century may see gradual ramp-up after operating at 60-65% utilisation in FY20. UTCEM’s strong profitability would further increase with 10% fixed costs reduction (Rs5bn p.a or Rs60/te.), improving profitability of Century’s assets, better cost efficiencies and operating leverage. With better profitability and minimal organic capex plan, UTCEM is likely to turn debt free by FY23E.

Outlook

We maintain our FY21E-FY22E EBITDA (~15% ahead of consensus) with unchanged target price at Rs5,100/share (13x Mar’22E EV/E). Valuation at 10xFY22E EV/E is attractive, in our view. Maintain BUY.

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