ICICI Securities maintains a hold rating on UltraTech Cement following a strong Q1 FY27 performance. The brokerage highlights concerns over rising fuel costs due to the West Asia crisis and seasonal demand weakness, which may pressure margins in the coming quarters.
Detailed Coverage
ICICI Securities has maintained its hold recommendation for UltraTech Cement, keeping the price target at ₹11,900 per share. This decision comes despite a robust performance in the first quarter of fiscal year 2027, where the company exceeded EBITDA estimates. During this period, UltraTech Cement recorded an EBITDA per tonne of ₹1,214, demonstrating stability despite cost pressures.
Impact of Fuel Costs and Seasonal Trends
The brokerage has expressed caution regarding the company's performance for the remainder of the fiscal year. A key concern is the potential impact of rising crude oil prices, which are expected to influence fuel costs significantly in the second quarter of FY27. Additionally, the cement industry typically faces seasonal weakness during the second and third quarters, a period that often sees downward pressure on cement prices across the country. These factors have led analysts to keep their outlook cautious rather than upgrading earnings expectations.
Competitive Intensity and Industry Capacity
Beyond cost pressures, the competitive landscape in the cement sector remains a significant factor for investors to monitor. Industry reports indicate that approximately 180 million tonnes per annum of new capacity is expected to be added between FY26 and FY28. Such substantial additions to supply often lead to increased competition, which can challenge a company’s ability to maintain its market share and pricing power. ICICI Securities currently values UltraTech Cement at 17 times its estimated EV/EBITDA for FY28, noting that there is limited scope for upward revisions in valuation multiples given these market realities.
Investors may continue to track the company’s ability to manage costs amidst the ongoing instability in West Asia, as fuel prices are a major component of cement manufacturing and logistics. Future updates on demand recovery after the monsoon season, as well as the company's ability to maintain its profitability levels in a more crowded market, will be key areas for long-term monitoring.