Motilal Oswal Research has issued a bullish 'BUY' recommendation on UltraTech Cement, forecasting robust growth powered by aggressive regional expansion, sustainability initiatives, and a clear trajectory for earnings upgrades. The research identifies South India as a key market driver, with UltraTech fortifying its leadership and displaying considerable financial muscle for capex and deleveraging. The recommended target price is Rs 15,200, implying a potential upside of 21% from the current Rs 12,572. This article highlights the company’s regional momentum, operational advancements, financial discipline, and strategic outlook for investors.

Motilal Oswal Initiates BUY on UltraTech Cement

Research house Motilal Oswal advocates a BUY on UltraTech Cement, targeting Rs 15,200 for the next twelve months. The rationale is based on UltraTech’s accelerating market presence and operational excellence, particularly in the dynamic South Indian cement landscape. Current valuations, at 18x EV/EBITDA for FY27E against a historical average of 17x, are justified by earnings upgrades, increased profitability, and disciplined capex. The stock trades at Rs 12,572 and offers a 21% upside anchored in strong fundamentals and strategic expansion.

Dominance in South India Cement Market

UltraTech’s regional strategy is yielding outsized gains, with South India now accounting for 27% of installed capacity compared to 16% in FY23. The industry capacity share in the south region has nearly doubled from 12% to 25%, revealing exceptional execution and purposeful expansion. Andhra Pradesh and Karnataka have emerged as pivotal centers, and new investments in Tamil Nadu and Telangana underpin the company's leadership. Management's optimism about pricing, utilization, and profitability bodes well for sustained momentum and future market share elevation.

Expansion Blueprint and Capacity Upgrades

The company is on track to reach 200 MTPA domestic capacity well ahead of the scheduled target, anticipating fresh expansion announcements in upcoming quarters. Plans include an additional ≈12 MTPA clinker and ≈18–20 MTPA grinding capacity in strategic locations such as Kalaburagi (Karnataka), Chittorgarh (Rajasthan), and Neemuch/Sidhi (Madhya Pradesh). The acquisition of ICEM and Kesoram plants further amplifies operational scale and geographical balance in the southern cluster. Plant utilization is projected to surpass 75%, underscoring efficient asset management.

Sustainable Efficiency Fuels Profit Upside

UltraTech is extracting value via tangible cost reduction programs and sustainability pivots. FY25 achievements include Rs 86/t savings through increased green power usage, reduced lead distances, and clinker factor optimization. Initiatives aim to lift green power to ≈60% by FY27, shrink lead distances to ≈343 km, and increase alternative fuel contributions. Such operational agility supports margin resilience, with EBITDA/t set to climb from Rs 924 in FY25 to Rs 1,286 by FY28.

Financial Strength and Balance Sheet Discipline

The company showcases improved free cash flow generation and strategic deleveraging, fortifying its financial flexibility. Between FY26–FY28, cumulative OCF is forecasted at Rs 521 billion and FCF at Rs 266 billion, comfortably funding organic and inorganic growth. Net debt is expected to peak at Rs 177 billion in FY25, before declining to Rs 100 billion by FY27. The net debt-to-EBITDA ratio is projected to fall below 1x, supporting capital investments and future expansions.

Performance Levels, Valuation, and Investor Target

UltraTech Cement’s stock performance has outstripped benchmark indices, growing 10% YTD versus the Nifty’s 5% rise. Management’s confident outlook around pricing, GST rate cuts, and rising infrastructure spend fortifies the investment case. The recommended levels are: Current Market Price (CMP) Rs 12,572, Target Price Rs 15,200, with key valuation metrics as follows:

Strategic Takeaways for Investors

UltraTech’s integrated strategy—spanning aggressive regional expansion, sustained efficiency programs, and financial prudence—positions it as the cement sector’s bellwether. Investors are advised to monitor pricing trends and fuel costs, though risk is mitigated by strong management execution and sectoral tailwinds. The BUY call is reaffirmed, with a 21% upside potential and Rs 15,200 as the 12-month price objective.

Bottomline

UltraTech Cement emerges as a compelling investment play, marrying scale advantage with profitability and prudent growth. Motilal Oswal’s BUY call is backed by clear regional strategies, operational milestones, and a robust financial outlook, making UltraTech Cement distinctly attractive for growth-oriented investors seeking sectoral leadership and sustained returns.