Equirus: UltraTech Cement, JK Cement Well Placed for Long-Term Growth Despite Near-Term Cost Headwinds

UltraTech Cement and JK Cement are well positioned to sustain growth and strengthen their market positions despite near-term cost pressures, supported by healthy demand, improving realisations and ongoing capacity expansion, according to Equirus Securities.

Following the June-quarter results, the brokerage maintained its ‘LONG’ rating on UltraTech Cement with a revised target price of ₹15,330, while retaining its ‘ADD’ rating on JK Cement with a target price of ₹6,160.

UltraTech Cement reported 12.2 per cent year-on-year volume growth during the June quarter, outperforming the industry’s estimated growth of 8-8.5 per cent. Equirus attributed the performance to healthy demand across housing, infrastructure and commercial construction, market share gains across regions and improved cement realisations. The brokerage expects UltraTech to continue delivering around 10 per cent volume CAGR over the next three years, supported by ongoing capacity additions.

The report noted that UltraTech’s EBITDA remained above ₹1,200 per tonne, aided by pricing improvement and integration benefits, although the company is expected to face an additional cost impact of around ₹130-140 per tonne in the September quarter due to higher fuel costs and maintenance expenditure. Equirus said the company is relatively better placed to manage these pressures because of its diversified fuel basket and long-term pet coke sourcing strategy.

On JK Cement, Equirus highlighted 19 per cent year-on-year growth in grey cement volumes, supported by recently commissioned capacities, expansion across Central and East India and healthy demand. The brokerage expects the company to continue benefiting from capacity ramp-up and market share gains over the medium term.

According to the report, higher fuel costs, maintenance expenses and monsoon-related operational deleverage are likely to keep margins under pressure in the September quarter. However, Equirus believes these headwinds are temporary, while the company’s long-term growth outlook remains supported by its expansion plans and improving product mix.

Sector outlook
Equirus expects the operating environment for the cement sector to remain supportive, backed by healthy demand and improved pricing trends witnessed during the June quarter. While the brokerage expects another quarter of elevated fuel costs, maintenance expenditure and monsoon-related operational deleverage, it believes leading players with ongoing capacity expansion and strong execution capabilities are better positioned to navigate the near-term challenges.

The brokerage highlighted that UltraTech Cement continues to expand its manufacturing footprint and expects capacity to reach around 242 million tonnes by FY28, while JK Cement remains on track with its long-term expansion strategy towards 50 million tonnes of installed capacity. According to Equirus, these expansion plans, together with resilient demand and pricing, underpin its positive stance on both companies despite the near-term margin pressures arising from higher input costs.