1 hr ago
Brokerage Sees 34% UltraTech Cement Upside From C&W Foray
UltraTech Cement is planning to enter the wires and cables business.
Brokerage firm Choice believes this is a careful move into a related area rather than a risky expansion.
It estimates UltraTech could win 6–7% of this market by FY30.
If the new factories operate at full capacity, the business could earn about Rs 9,000 crore each year.
Choice expects profit margins of roughly 10–12%.
It also estimates the business could earn more than 20% on the money invested in it.
The brokerage believes the project could add value for shareholders.
It has given UltraTech Cement a 12-month price target of Rs 15,210, without yet including the new business’s possible value.
Choice projects UltraTech Cement could capture 6–7% of India’s domestic wires and cables market by FY30.
The wires and cables business could generate around Rs 9,000 crore in annual revenue at full capacity, estimated around FY30–31.
Choice estimates the business could achieve a 10–12% EBITDA margin and more than 20% asset-level ROCE.
The brokerage estimates shareholder returns of around 8%, potentially making the project value accretive.
Choice set a 12-month target price of Rs 15,210 per share using a 3.8x FY28E EV/CE multiple, excluding possible value from the new business.
- Who
- UltraTech Cement and brokerage firm Choice.
- What
- UltraTech’s planned entry into the domestic wires and cables business, and Choice’s positive valuation assessment.
- Where
- The domestic wires and cables market; the article does not specify a particular location for the facilities.
- When
- The market-share target is for FY30; full capacity is estimated around FY30–31, with a 12-month share-price target.
- Why
- Choice views the move as a measured entry into an adjacent category with potential for attractive returns and value creation.
Key facts
- Brokerage view
- Choice sees 34% upside in UltraTech Cement shares.
- Share-price target
- Rs 15,210 over 12 months.
- Valuation method
- 3.8x FY28E EV/CE multiple.
- Market-share target
- 6–7% of the domestic wires and cables market by FY30.
- Potential annual revenue
- Around Rs 9,000 crore at full capacity.
- Expected EBITDA margin
- 10–12%, broadly in line with established industry players.
- Estimated asset-level ROCE
- More than 20% at peak utilisation.
Quotes
Choice
Brokerage providing valuation and investment analysis of UltraTech Cement
“We value UltraTech Cement using an EV/CE-based methodology, assigning a 3.8x FY28E EV/CE multiple, which translates into a 12-month TP of Rs 15,210/share. Importantly, our current valuation does not factor in any potential value accretion from the company's wires and cables foray, as we prefer to monitor the execution and progress of the new business before incorporating its contribution”
businesstoday.in
“UltraTech Cement remains our preferred large-cap cement play, supported by its superior long-term earnings visibility and strong execution capabilities”
businesstoday.in
Sources
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