On the valuation front, the stock of UltraTech is currently trading at an EV/Ebitda of 14.4, based on its estimated FY25 earnings.
In recent years, cement firms have faced challenges due to high raw material costs, which have impacted their margins. However, in the year-to-date period in 2023, prices of pet coke and thermal coal have fallen by around 40%. This decrease in raw material prices is expected to provide relief to cement firms and boost their margins.
UltraTech Cement, India’s largest manufacturer of the primary building material, is making efforts to take advantage of the falling raw material prices and improving demand. The company has focused on improving four key variables that can contribute to margin improvement: cost control, capacity expansion, maintaining a strong balance sheet, and implementing price increases.
Overall, UltraTech Cement is well-positioned to benefit from the favorable market conditions and is expected to witness improved operating margins.