๐ข 5 STEPS TOWARDS WEALTH ๐ The Indian Stock Market Way
Ultracemco: CMP: 11105: Long term Sales Gr 13% | H1_fy25: 0% | H1_fy25_Result Update
### About UltraTech Cement
ULTRATECH is one of the flagship companies of Aditya Birla Group. Ultratech has the distinction of being the only company globally (ex-china) to have around 152.7+MTPA of cement manufacturing in a single country. UltraTech Cement Limited is the largest manufacturer of grey cement, ready mix concrete (RMC), and white cement in India. It is also one of the leading cement producers globally. Once started with 1 Mtpa in 1983, The company has a consolidated capacity of 150 MTPA of grey cement & looking forward to reaching 179 MTPA till FY_2027, with operations across India, UAE, Bahrain, and Sri Lanka. They are India's largest cement company with a market share of more than 30%.
### Industry Outlook
The cement industry is expected to grow driven by:
- **Government Infrastructure Projects:** Continued focus on infrastructure such as roads, rail, and metros.
- **Housing Demand:** Strong demand in both rural and urban housing supported by government schemes and real estate growth.
- **Commercial Sector:** Steady growth driven by the completion of ongoing projects.
### Peer Companies Analysis
Key peers in the cement industry include Shree Cement, Ambuja Cement, ACC Limited, and Dalmia Bharat. UltraTech Cement stands out due to its larger capacity, extensive geographical presence, and focus on sustainable practices and premium products.
### UltraTech Historical Performance
- **Past Performance:** Consistent growth in capacity, revenue, and profit margins.
- **fy_2005:** Production of 15 MMT, Sales and profit of 2700 Cr and 3 Cr Respectively. Price was around 320.
- **fy_2015:** Production of 45 MMT, Sales and profit reached 23000 Cr and 2000 Cr Respectively. Price rallied around 2700 which was near to 10X.
- **Est_fy_2025:** This year Production could reach 131 MMT, Sales and profit could reach 78000 Cr and 7000 Cr Respectively.
We saw the capacity growth of 8X, Sales growth of 29X & strong profit growth helped valuation growth. Price rallied around 12000 which is again 40X. Distributed consistent dividends all the year during the past 19 years of post IPO history.
### Recent
Many of you in this group have been holding this wealth creator for a long time, around 1200 a few years back when Ultratech was not part of Nifty_50. Have recommended doing continuous SIP in this stock. Successful integration of the biggest acquisition in the Indian cement industry. In 2013 - Acquired Jaypee Group's Gujarat cement unit for โน3,800 cr. Later in 2017 - Acquired Jaiprakash Associates' six integrated cement plants for โน16,189 cr. During the year 2018 - Entered into a scheme of arrangement with Century Textile and Industries to demerge Century's cement business into Ultratech. Nov 2018 - Acquired Binani Cement for โน7,266 cr. We saw Company growing both organically as well as in-organically. Recently in the process of acquiring Kesoram Industries & Burnpur Cement.
UltraTech Cement Q2 FY25 Results - In-Depth Analysis ๐
๐ข Revenue from Operations
โน15,634.73 Cr
๐ -2.4% YoY decline from โน16,012.13 Cr in Q2 FY24
๐ -13.5% compared to Q1 FY25 (โน18,069.56 Cr)
๐ป Net Profit
โน825.18 Cr
๐ -35.5% YoY decline from โน1,280.38 Cr in Q2 FY24
๐ -51.3% compared to Q1 FY25 (โน1,695.22 Cr)
๐ Key Segment Performance
โฟก Power & Fuel Expense: โน3,837.69 Cr
๐ down from โน4,493.74 Cr in Q1 FY25
๐ down from โน4,385.33 Cr in Q2 FY24
โฟข Freight & Forwarding Expense: โน3,583.51 Cr
๐ down from โน4,181.29 Cr in Q1 FY25
๐ slightly up YoY from โน3,511.76 Cr
โฟฃ Cost of Materials Consumed: โน2,569.63 Cr
๐ up from โน2,348.47 Cr in Q2 FY24
โฟค Employee Benefits Expense: โน913.86 Cr
๐ up from โน812.30 Cr in Q2 FY24
๐ข Total Expenses
โน14,837.44 Cr
๐ down from โน16,128.37 Cr in Q1 FY25
๐ slightly up from โน14,493.01 Cr YoY
๐ผ Important Financial Ratios
Debt-Equity Ratio: 0.25
๐ Higher than Q2 FY24โs 0.18, reflecting moderate leverage.
Interest Coverage Ratio: 7.75
๐ Down from 11.35 in Q2 FY24, indicating lower ability to cover interest expenses.
Net Profit Margin: 5%
๐ Down from 9% in Q1 FY25 and 8% in Q2 FY24, signaling weaker profitability.
Operating Margin: 13%
๐ Decreased from 17% in Q1 FY25 and 16% in Q2 FY24.
Current Ratio: 1.17
Stable liquidity compared to 1.05 in Q2 FY24.
Inventory Turnover Ratio: 7.05
๐ Decreased from 8.58 in Q1 FY25, indicating slower inventory movement.
๐ Cash Flow Position
Operating Cash Flow: โน2,826.39 Cr
๐ Down from โน3,357.22 Cr YoY, showing lower cash generation.
Investing Activities: Significant capital investment of โน4,490 Cr into property, plant, and equipment, reflecting expansion strategies for future growth.
๐ก Benefits for Investors
Stability & Market Leadership: UltraTech remains the largest cement producer in India, providing a safe and stable investment option during uncertain economic periods.
Cost Optimization: The companyโs strategic focus on reducing fuel and logistics costs will help improve margins, offering better profitability for long-term investors.
Dividend Track Record: Regular dividend payouts provide consistent returns for investors looking for income-generating stocks.
ESG Initiatives: UltraTechโs investment in green cement production and sustainable practices makes it attractive for environmentally-conscious investors.
๐ Long-Term Prospects for Investors
โฟก Capacity Expansion: UltraTech plans to exceed 200 MTPA by FY27, which will significantly boost production capacity and revenue potential.
โฟข Government-Driven Growth: Major projects under the Pradhan Mantri Awas Yojana (PMAY) and infrastructure development will continue to drive cement demand, benefiting UltraTech's bottom line in the long run.
โฟฃ International Diversification: The acquisition of RAKW in the Middle East will diversify the companyโs revenue sources, reducing reliance on domestic demand and adding stability during periods of domestic market fluctuation.
โฟค Sustainability Focus: Long-term commitment to sustainable practices and green energy adoption aligns with global trends, ensuring UltraTech is well-positioned to benefit from ESG-focused investments.
- **Fy_25 Est:** We may see 7% volume growth taking Ultratech to 131 MMT, with 5% sales and 0% profit growth. Valuations at F_Earnings is 46PE which is expensive then Fair PE of 25. New buying again can be done during any fall near 8857 while pending target we have been waiting since last year of 13818 could be seen soon where 5% profits can be booked.
- **Future Outlook:** UltraTech plans to expand its grey cement capacity to 183.5 MTPA by FY27. It continues to invest in green energy and sustainable practices, aiming for a green power mix of 85% by FY30. We may see them cross 1 Lakh Cr sales just in the next 3 years while till fy_35 we may even see them triggering 25000 Profits. The company is well-positioned for future growth with its focus on capacity expansion, sustainability, and premium product offerings.
### Conclusion:
Construction of highways started a record 12,300 kilometres in '24, almost 34 or 35 kilometres per day. This is the second highest rate at which the construction of highways is being seen in the country. India is urbanising. Vertical houses are increasing, but yet India still remains an individual home builder market. IHBs as they are called continue to be the biggest demand driver segment for cement in India. Last year, 40 million tons of new capacity was commissioned, but at different points in time during the year, out of which UltraTech had a share of almost 1/3. Currently India is the 2nd largest producer in the world but still due to lower GDP/CAPITA the Cement/Capita is also too low as India consumes just 240-250 kg cement/capita v/s China 1700kg/capita which is around 7X. Even countries like Brazil and Indonesia consume more cement/capita.
A wealth creator company for the long term where we can expect a multiyear rally along with consistent & growing dividends.
### Disclosure:
We have been investing in this company for a long time, but we are not tip providers. Investors should check the data on their own and should invest as per his/her conviction.
