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 UltraTech Cement: Margin outlook continues to improve

-       UltraTech Cement (UTCEM) continued to improve its costs and margins in 1QFY22; it reported the highest ever EBITDA/unit of INR1,536/t (+8% YoY) during the quarter. Coupled with volume growth of 47% YoY, this led to 59% YoY growth in EBITDA. 

-       Market share gains should continue, aided by the ongoing 20mtpa expansion program, which should drive a 13% volume CAGR over FY21-24E.

-       We estimate a 15%/26% CAGR in consolidated EBITDA/PAT over FY21-23E, driven by a 13% volume CAGR, better realizations, lower operating costs, and lower interest costs.

-       The valuation is reasonable at 13.7x FY23E EV/EBITDA - a 10% discount to its last five years' average. We value UTCEM at 16x FY23E EV/EBITDA to arrive at TP of INR8,770. Reiterate Buy.

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