UltraTech Cement slips for 2nd day; Nomura calls it top stock pick from cement sector

Foreign brokerage Nomura India has upped its target price on UltraTech Cement, as it expects higher utilisation and efficiency measures at acquired assets would support Ebitda per tonne expansion. The brokerage said UltraTech's Q1 Ebitda largely came largely in line with its estimate and took into account a likely 3 per cent decline in sequential Q2 cement realisations amid monsoon. 

That said, Nomura remains optimistic about UltraTech’s long-term prospects. It has maintained its ‘Buy’ rating on the stock and raised its target price by 9 per cent to Rs 13,900 from Rs 12,800.

"To factor in upcoming expansion and higher efficiencies from acquired assets, we raise our one-year-forward EV/Ebitda multiple to 18x (17x previously). Ultratech remains our top pick in the industry; we reiterate our Buy rating and raise our TP by 9% to Rs 13,900. The stock currently trades at 20.5x," Nomura India said.

On Wednesday, the UltraTech Cement stock fell for the second straight session, edging 0.7 per cent lower to Rs 12,364.25 on BSE. The cement major recently posted a 49 per cent year-on-year (YoY) growth in its consolidated net profit for the June quarter. 

The stock is just 2.7 per cent away from its 52-week high of Rs 12,711.95 apiece. It was up 9 per cent in the past six months.

For Q1 FY26, the Aditya Birla Group company reported a profit after tax (PAT) of Rs 2,226 crore. Nomura said UltraTech's reported EBITDA of Rs 4,410 crore was largely in line with both its forecast and the Bloomberg consensus estimate.

"Ultratech reported 14 per cent YoY volume growth, 2 per cent below our estimate, however, management stated 6.5 per cent y-y growth of Ultratech brand volumes," Nomura said in its latest report. The cement realisation improved 3 per cent quarter-on-quarter (QoQ), while blended EBITDA per tonne at Rs 1,197 came in 3 per cent above Nomura’s estimate.

Nomura increased its FY26/27 volume estimates by 4 per cent and 1 per cent to 146 mt and 165 mt, as it expects higher utilisation from the recently acquired assets. 

"Our FY26F/27F Ebitda estimates increase by 11 per cent/5 per cent to Rs 18,300 crore/Rs 23,200 crore," it said.

Nomura also noted management's intent to announce the next phase of organic expansion during FY26. The brokerage said UltraTech remains its top pick in the cement sector.