Shares of UltraTech Cement were trading in the green on Monday, September 21, after HSBC reiterated its "Buy" call on the stock with a target price of ₹14,200 per share. The target price implies an upside of around 29% from Friday's closing price of ₹11,014 for UltraTech.
HSBC expects UltraTech Cement's industry-leading profitability and volume growth to continue, with recent cement price increases helping the company offset the rise in variable costs. The brokerage also disagrees with the investor concern that UltraTech is prioritising market share at the expense of profitability.
UltraTech's one-year forward enterprise value-to-EBITDA multiple has declined from a peak of 26 times to around 13.7 times currently, HSBC noted as a result of this correction. This valuation de-rating of UltraTech is not justified, given that the company's industry-leading volume growth, profitability and market share are likely to remain intact, HSBC wrote in its note, adding that UltraTech's Pan-India presence, size and scale should continue to ensure that the stock commands a valuation premium.
HSBC said the September cement price increases are likely to help the company pass on the recent increase in variable costs. It also expects UltraTech to continue growing faster than the industry, as it has consistently done in the past. Analyst consensus and stock performanceAccording to the analyst data, 38 of 42 analysts covering UltraTech Cement have a "Buy" rating, while two each have a "hold" and "sell" rating.
The 12-month consensus target price stands at ₹13,956, implying around 27% upside from Friday's closing price of ₹11,014. UltraTech Cement shares moved between gains and losses on the NSE on Monday morning before recovering into the green. The stock was trading 0.4% higher at around ₹11,060, while on BSE, the shares were trading about 3.7% higher at ₹11,059.90 around the same time.
The stock's percentage gain is different across the two exchanges because of a divergence in their respective Friday closing prices following the introduction of the new Closing Auction Session . UltraTech Cement had closed at ₹10,670 on the BSE on Friday, compared with ₹11,060 on the NSE.
Under CAS, which came into effect for eligible stocks on August 3, closing prices are determined through a separate 20-minute auction based on demand and supply at each exchange, replacing the earlier last-30-minute volume-weighted average price methodology.
As a result, the same stock can have different official closing prices on the NSE and BSE, which in turn affects the percentage change shown on each exchange. Shares of Ultratech Cement have gained about 6.5% in the last six months, but have declined more than 7% since January this year.