UltraTech Cement set for higher volumes, tighter grip on costs

UltraTech saw some demand weakness when FY26 began due to heatwaves and urban real estate slowdown. However, it expects the demand situation to improve.

Industry volume likely grew 4% year-on-year in FY25 and UltraTech did a tad better with about mid-single digit like-to-like growth. The company has recently concluded acquisitions of The India Cements Ltd and cement assets of Kesoram Industries Ltd. Faster integration of these should buoy volume growth prospects.

Ultratech’s total domestic grey cement capacity stood at 183.5 mt in FY25 and is slated to touch 210.5 mtpa by FY27. According to JM Financial Institutional Securities Ltd, out of the total grey cement capacity added by UltraTech in FY25, 62% was through the inorganic route. With timely additions, JM Financial expects UltraTech to see around 450 basis points rise in capacity market share to 27% by FY27.

Acquisitions would certainly help UltraTech up its market share game, but a lingering concern has been the profitability drag from the sub-optimal acquired assets. But there has been some progress. India Cements achieved an Ebitda break-even in the first quarter after the takeover; it also clocked highest-ever monthly volume of over 1 mt in March. UltraTech targets to improve India Cements’ Ebitda per tonne to ₹800 and ₹1,000 by FY27 and FY28. Kesoram should operate at over ₹1,000 per tonne by Q4FY26 from ₹400 per tonne in Q4FY25, the management said.

Also Read: UltraTech cements its lead—and looks to build on it

“Though Kesoram’s profitability during the quarter was in-line with our estimates, India Cements has surprised by achieving an Ebitda break-even versus an estimated operating loss,” said Motilal Oswal Financial Services report dated 28 April. The broking firm estimates a CAGR of 15% and 29% in consolidated revenue and Ebitda over FY25-FY27, aided by inorganic growth.

Ultratech achieved a cost reduction of ₹86 per tonne in FY25 out of a target of ₹300 per tonne by FY27. It targets cost savings of around ₹214 per tonne in FY26. Higher usage of green power & WHRS (waste heat recovery systems), reduction in lead distance, and higher clinker conversion/usage of alternate fuel have helped.

Still, UltraTech needs support from cement prices to spur realisations. Prices improved in April versus March exit, though the sustainability would depend on the demand-supply dynamics, the management said. With the reducing pace of sector consolidation, cement prices are widely expected to start reviving in FY26.

Also read: UltraTech’s entry into cables & wires shocks KEI, Polycab and Havells stocks

Improving outlook

Based on the measures taken so far by UltraTech, projections are improving. “We raise Ebitda estimates by 7%/3% for FY26/27E, factoring in higher volumes on consolidation of recent acquisitions and lagged cost benefits. We expect UltraTech to continue its outperformance of peers on operational parameters and enjoy superior growth visibility,” Kotak Institutional Equities report said on 28 April.

FY25 capital expenditure was ₹9,000 crore, and FY26 guidance is around ₹9,000-10,000 crore, including capex announced for the cable and wire segment. Monitoring UltraTech’s debt trajectory is crucial given the capacity expansions. A key metric—the net debt/Ebitda was elevated at 1.16x at Q4FY25 end. The management expects debt to start reducing rapidly due to a ramp-up in volumes and lower capex intensity from FY27 onwards. While UltraTech’s comfortable net debt/Ebitda is 0.5x, it did not share a timeline to achieve this.

Amid this, UltraTech’s stock hit a new 52-week high of ₹12,339 apiece on Monday. It has gained 19% over the past year, beating the Nifty50 index. According to Bloomberg data, the stock trades at FY26 EV/Ebitda of 21x—a discount to some large-cap peers.

Also Read: Cement price hikes in April ease margin fears—at least for now