ULTRACEMCO - UltraTech Cement Ltd Share Price

In the Q4 FY-25 earnings conference call for UltraTech Cement Limited, management provided an optimistic outlook with key forward-looking pointers. They reported that India's cement industry capacity has increased to approximately 655 million tons, with UltraTech contributing significantly by adding nearly 57% of the new capacity. UltraTech's own capacity rose from 140 million tons to 184 million tons due to two acquisitions, emphasizing their growth strategy.

For FY-26, management anticipates a double-digit volume growth and aims for an EBITDA per ton of INR 500, projected to reach INR 800 by FY-27 and a four-digit figure thereafter. They mentioned a capex plan of about INR 9,000 to 10,000 crores for FY-26, primarily focused on strategic investments and ongoing expansions that will increase their capacity from 184 million tons to approximately 212 million tons.

UltraTech also targets significant cost efficiency improvements, striving for an overall cost reduction of INR 300 per ton by FY-27. Current debt levels are manageable, with a net debt-to-EBITDA ratio of 1.16x, which they expect to reduce swiftly as sales volumes and profitability improve.

The management noted that the quarter's performance included both existing and newly acquired asset contributions. Kesoram's operations have begun to integrate smoothly, with initial signs of an improving EBITDA following their acquisition. They expect to achieve a throughput of over 1 million tons in India Cements, reinforcing the positive trajectory.

Lastly, they highlighted optimism about government spending in infrastructure and anticipated a recovery in urban housing demand as summer temperatures normalize, affecting construction activity positively in the coming months.

1. Question: Prateek Kumar from Jefferies: "Any specific reason for the remark about short-term challenges while the long-term is better? How should we look at volume?"

Answer: I define the short term as this quarter due to high heat impacting construction. Otherwise, we anticipate a positive landscape.

2. Question: Prateek Kumar: "What is the expectation on volume growth for FY '26?"

Answer: We expect double-digit growth this year on a higher base, with significant contributions from our new acquisitions.

3. Question: Indrajit Agarwal from CLSA: "Is the 10% volume growth organic?"

Answer: No, that includes Kesoram volumes. Excluding Kesoram, we still expect above mid-single-digit growth.

4. Question: Indrajit Agarwal: "What levers will take India Cements' profitability to INR500 and INR800 per ton?"

Answer: Investments in WHRS and alternate fuels, coupled with improved capacity utilization, efficiency, and margins, will drive profitability.

5. Question: Amit Murarka from Axis Capital: "Will India Cements remain independent or be rebranded?"

Answer: We'll enter tolling arrangements and gradually transition to the UltraTech brand over approximately two years.

6. Question: Ritesh Shah from Investec: "What leverage will you be comfortable with on net debt to EBITDA?"

Answer: We are comfortable with a net debt to EBITDA ratio of 0.5x in the longer term.

7. Question: Rahul Gupta from Morgan Stanley: "How do we see cost improvement and benefits from Kesoram?"

Answer: Cost improvements are ongoing. By FY '28, we expect substantial benefits from both Kesoram and India Cements' operations.

8. Question: Pulkit Patni from Goldman Sachs: "Will the INR300 cost improvement require price increases?"

Answer: Under current conditions, INR250 to INR300 improvement seems achievable even without pricing changes, but market dynamics could impact this.

9. Question: Sanjeev Kumar Singh from Motilal Oswal: "What guidance can you provide on the Building Products segment?"

Answer: We expect ROCEs of 30% to 40% and aim to grow revenues to around INR3,000 crores over the next three years.

10. Question: Shravan Shah from Dolat Capital: "What was clinker utilization this quarter?"

Answer: We achieved 90% cement utilization this quarter, with an average of 79% for the full year on UltraTech's existing assets.