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    UltraTech Cem.

    ULTRACEMCOGood
    Construction Materials·23 Jan 2025
    Management Summary

    UltraTech delivered a strong Q3 FY25 with 10% volume growth, significantly outpacing the industry at ~5%. EBITDA per ton jumped over 30% QoQ to ₹964, driven by improving realizations and lower fuel costs. The quarter was transformative on the inorganic front — India Cements open offer concluded with an EV of ~$97-98/ton, and a strategic 8.42% stake in Star Cement was acquired for ₹776 crores to deepen Northeast presence.

    Highlights

    8

    • Volume growth of 10% YoY, outperforming industry growth of ~5%

    • EBITDA per ton of ₹964, up more than 30% over Q2 FY25

    • Realization improved 1.4% QoQ; North and West saw >3% price improvement

    • India Cements open offer concluded at ₹390/share; 81.49% equity held; EV at ~$97-98/ton

    • Star Cement: 8.42% stake acquired at ₹776 crores

    • Consolidated net debt at ₹16,160 crores post India Cements open offer

    • Capacity target of 185 MTPA at FY25 end including acquisitions

    • Fuel cost down to ₹1.76/kcal from ₹1.84/kcal; pet coke mix at 58%

    What Changed2

    vs Q3 FY25

    Guidance items5 → 10 (+5)Risks discussed2 → 3 (+1)

    Key financials

    Single quarter

    06 metrics
    1. 01EBITDA/Ton₹964+30%QoQ
    2. 02Volume Growth10%
    3. 03Fuel Cost1.76 Rs/kcal-4.3%QoQ
    4. 04Clinker Conversion1.45 x
    5. 05Lead Distance377 km

    Guidance & targets

    10
    CategoryTargetPriority
    Capacity
    Total Capacity FY25 End
    185 MTPA
    		High
    Capacity
    Organic Capacity Addition FY26
    10-15 MTPA
    		High
    Capacity
    WHRS Capacity
    511 MW
    		High
    Capacity
    Renewable Energy Capacity
    ~2.1 GW
    		High
    Volume
    Volume Growth FY26
    Double-digit growth
    		High
    Volume
    Capacity Utilization Target
    80-85%
    		High
    Capex
    Capex FY26
    ₹9,000 crores
    		High
    Capex
    Capex FY27
    ₹6,000-7,000 crores
    		Medium
    Cost
    Fuel Cost Near-term
    ₹1.7/kcal
    		Medium
    Margin
    India Cements Turnaround
    12 months
    		High

    Risks & concerns

    5
    RiskSeverity

    State-level mineral taxes post Supreme Court judgment allowing states to levy taxes on limestone

    Impact limited to Chhattisgarh and Rajasthan for UltraTech; Tamil Nadu and Karnataka planning new taxes. Central government considering intervention. — Analyst acknowledged

    medium

    South India pricing pressure from new capacity additions (Penna, India Cements ramp-up, Kesoram)

    CFO's response was 'If demand picks up my guess is prices will also improve' — somewhat dismissive of competitive concern. — Analyst downplayed

    medium

    Pet coke price volatility and fuel mix constraints

    Company cannot do 100% pet coke due to scale; prices volatile — went up $4 in 2 days. Blended fuel cost will stay above pure pet coke levels. — Management acknowledged

    low

    Areas of Evasion(2)

    • India Cements detailed CAPEX plans — asked for one more quarter
    • Sanghi Cement comparison — deflected with irritation

    Q&A highlights

    3

    “We are looking at least 12 months to turn around the performance of India Cements assets. Not the same profitability, maybe Rs. 200-Rs. 300 lower.”

    Sets clear expectations for ICL integration — turnaround within 12 months but EBITDA/ton still ₹200-300 below UltraTech level

    asked by Pulkit Patni, Goldman Sachs

    2 min read5 chapters

    Detailed Narrative

    01

    India Cements Acquisition: Below-Market EV Creates Value Opportunity

    The India Cements open offer concluded with 110% subscription at ₹390/share, giving UltraTech 81.49% equity. The EV works out to ₹12,075 crores for 14.45 MTPA capacity at ~$97-98/ton — well below the market assumption of $120/ton. Net debt in ICL as of Dec-24 was only ₹877 crores, and non-core asset monetization will reduce it further. Management targets turning around ICL performance within 12 months.

    02

    Demand Recovery Led by Infrastructure Push

    After a subdued first 8 months of FY25, demand picked up in December. Central government capex was down ~12% in Apr-Nov 24, but is expected to improve from January 25 onwards. Rural markets are supported by good monsoons and harvest. UltraTech grew volumes 10% vs industry's ~5%, maintaining its outperformance streak.

    03

    Southern Market Consolidation: From 20 to 60 MTPA Capacity

    Through India Cements (13 MT in South) and Kesoram acquisitions, UltraTech has tripled its South capacity from 20 to ~60 MTPA, capturing nearly 30% capacity share. India Cements was operating at only 57% utilization, presenting significant upside. Brand transition will be gradual — a ₹20-25/bag realization gap exists between UltraTech and India Cements brands.

    04

    Efficiency Programs on Track with Measurable Gains

    Clinker conversion ratio improved to 1.45x from 1.44x in Q4 FY24. Lead distance reduced to 377 km from 400 km at program start, delivering ~₹70/ton savings. WHRS capacity reached 324 MW (from 278 MW), and renewable energy at 752 MW (from 612 MW). Fuel cost dropped to ₹1.76/kcal from ₹1.84/kcal with higher pet coke share at 58%.

    05

    Capacity Expansion Roadmap: 211-212 MTPA by End of Growth Program

    UltraTech targets 185 MTPA by FY25-end and plans to add 10-15 MTPA organically in FY26, reaching 211-212 MTPA. WHRS target has been revised upward to 511 MW (from 450 MW) and renewable energy to ~2.1 GW (from 1.8 GW) to incorporate India Cements and Kesoram requirements. Capex of ₹9,000 crores planned for FY26 and ₹6,000-7,000 crores for FY27.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.