UltraTech Cement share price crosses ₹10,000 mark, up 40% this year; should you buy?

In today's trading session, UltraTech Cement, a flagship company of the Aditya Birla Group, achieved a historic milestone as its shares surged beyond the ₹10,000 mark for the first time. After multiple attempts in the past, today's trading session witnessed the stock successfully crossing this significant threshold, reaching an all-time high of ₹10,042.95 apiece, gaining 1.82%.

The company is the third-largest cement producer in the world, outside of China, with a total grey cement capacity of 137.85 MTPA. Its shares this year so far have rallied significantly, delivering a return of 40.13%.

Also Read: One step at a time: UltraTech moves steadily towards its goal

This impressive performance has propelled the company's market capitalisation to nearly ₹3 lakh crore. Taking the stock's all-time high price of ₹10,042.95 into account, the company's m-cap reached ₹2.89 lakh crore. As per the most recent data, only 20 stocks are currently trading above the ₹10,000 mark on the Indian stock exchanges.

Meanwhile, UltraTech Cement is set to acquire the cement business of BK Birla Group's flagship company, Kesoram Industries, in an all-share deal valued at approximately ₹7,600 crore, including debt.

On November 30, Kesoram announced through a regulatory filing that its board has approved the demerger of its cement business under a scheme of arrangement. In the deal, shareholders will receive one share of UltraTech Cement for every 52 Kesoram shares of ₹10 each.

Also Read: UltraTech to acquire Kesoram's cement business

This deal will provide UltraTech with the opportunity to extend its footprint in the highly fragmented, competitive, and fast-growing Western and Southern markets in the country. It will help enhance UltraTech’s geographic reach in southern markets such as Telangana, where UltraTech currently does not have any cement manufacturing plant, said brokerage firm Axis Securities in its latest note.

The operations will be bolstered by economies of scale resulting from synergies in procurement, logistics, and fixed costs, it added.

Besides, UltraTech Cement acquired 0.54 mtpa cement grinding assets of Burnpur Cement Limited, located at Patratu in Jharkhand, at a consideration of ₹169.79 crore. This strategic investment marks UltraTech Cement's entry into the state of Jharkhand.

Also Read: COP28: Adani Group pledges sustainable revolution in cement industry

The demand for cement has remained robust post Covid-19, owing to increased government spending on infrastructure development, affordable housing initiatives, and strong demand for urban housing and real estate.

Will the rally continue?

Fueled by heightened demand, enhanced realisation, expanding market share, and strategic cost optimisation measures, Axis Securities anticipates robust growth for the company. 

The brokerage firm foresees a CAGR of 12% in revenue, 21% in EBITDA, and 30% in adjusted profit after tax (APAT) over the period from FY23 to FY26E. This optimistic outlook is underpinned by a strong CAGR of 11% in volumes during the same timeframe.

The brokerage rolled over its estimates to FY26 and valued the company at 16x FY26E EV/EBITDA to arrive at the price target of ₹10,850 apiece, maintaining a 'buy' rating.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.