Buy Ultratech Cement; target of Rs 8500: Emkay Global Financial

Emkay Global Financial is bullish on Ultratech Cement has recommended buy rating on the stock with a target price of Rs 8500 in its research report dated October 19, 2021.

Broker Research

October 19, 2021 / 02:40 PM IST

500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" title="HDFC Securities research report's outlook and valuations: "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."" width="100%" height="auto" >

HDFC Securities research report's outlook and valuations: "The YTD EPS upgrades (consensus) have been led by mid-tiers such as Tata Elxis, Mindtree, Mastek, and Persistent Systems, ranging from 20-40 percent and, within tier 1, by Wipro (~15%). We expect the sector (coverage universe) to post 13 percent and 14.5 percent USD revenue/APAT CAGR over FY21-24E compared to 6.5/7.5 percent over the past five years. The mid-tier valuation premium relative to tier 1s may sustain, based on its relative outperformance (>500bps growth outperformance over FY21-24E as compared to 250bps earlier). We roll over valuations to Sepemtember-23E and increase target multiples for most of the companies in our coverage universe. We remain broadly constructive across the sector and ahead of consensus on growth/EPS; our preferred picks are Infosys, HCLT, Mphasis and Zensar."

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Emkay Global Financial's report on Ultratech Cement

Consolidated EBITDA was flat YoY at Rs27bn (down 18% QoQ) in Q2FY22, in line with our estimate, as higher-than-expected cost/ton was offset by better blended realization (led by white cement and RMC business) and higher other operating income. Accordingly, blended EBITDA/ton declined 7% YoY/18% QoQ to Rs1,254. We expect UTCEM's RoIC to increase to a sustainable level of 20%+ within 4-5 years (vs. 12% in the past decade), driven by rising utilization levels and improving margins. Factoring in higher opex/ton due to input cost inflation, we cut our FY22-24 EBITDA estimates by 3-4%.

Outlook

We roll over to Dec'22 from Sep'22 and maintain our TP at Rs8,500. Our DCF-based TP (11.25% WACC, 8% FCFF growth post FY26) implies a 1-year forward EV/EBITDA of 15x (vs. 15.6x earlier). Maintain Buy.

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