Citi has maintained its ‘Buy’ call on UltraTech Cement with a target price of ₹12,500, highlighting the strategic importance of the potential acquisition of the remaining stake in Star Cement.
Key Takeaways
- North East Market Entry:
- UltraTech Cement currently lacks capacity in the North East, a market with a size of 14-16 million tonnes (mt).
- If the acquisition goes through, the company will secure a significant market share in this region.
- Growth Projections:
- The North East market is expected to grow at an estimated 10% volume CAGR through FY24-FY27, offering a lucrative growth opportunity.
- EBITDA per tonne is projected to benefit from this expansion.
- Valuation Metrics:
- UltraTech trades at an EV/tonne of $200, which is below the historical peak of $250, making the acquisition more attractive from a valuation perspective.
- Strategic Implications:
- This acquisition would provide UltraTech Cement with a foothold in the region and complement its existing operations, paving the way for enhanced geographical diversification.
The acquisition, if finalized, is expected to strengthen UltraTech’s competitive positioning and drive long-term growth in a high-potential market.
Disclaimer:
This article is for informational purposes only and does not constitute financial advice. Please consult a qualified financial advisor before making investment decisions.
