UltraTech Cement Q1 earnings beat offset by fuel costs and capacity competition

Investment View and Recommendation

In its July 21, 2026 results update, ICICI Securities maintained a HOLD recommendation on UltraTech Cement with an unchanged target price of Rs 11,900 per share, compared with the CMP of Rs 11,903. The broker described Q1 FY27 as one of UltraTech Cement’s best quarters, with industry-superior profitability maintained despite fuel-cost pressure.

However, ICICI Securities does not see sufficient confidence to upgrade its earnings or valuation assumptions. Q2 FY27 is expected to absorb the full impact of the crude-oil surge, while Q2-Q3 have historically been seasonally weak periods for cement pricing.

Q1 FY27 Operating and Financial Performance

UltraTech Cement reported consolidated Q1 FY27 sales volume of 41.3 million tonnes, up 12.2 per cent year on year and 2 per cent above ICICI Securities’ estimate. Domestic grey-cement volume growth was 13.1 per cent year on year, ahead of estimated industry growth of 7-8 per cent, according to management.

Net sales increased 15.9 per cent year on year to Rs 24,648 crore, 3.8 per cent above the broker’s estimate. Blended realisation rose 3.4 per cent quarter on quarter to Rs 5,967 per tonne, compared with the broker’s expectation of a 2 per cent increase.

Profitability and Cost Pressures

EBITDA per tonne was Rs 1,214, broadly flat year on year and down 3.1 per cent quarter on quarter, but 2.1 per cent above the broker’s estimate. EBITDA margin declined 40 basis points year on year and 140 basis points quarter on quarter to 20.3 per cent.

Higher revenue partly offset cost pressure. Total operating cost per tonne rose 5.2 per cent quarter on quarter to Rs 4,753, with power and fuel cost per tonne up 8.3 per cent and other expenses up 15.7 per cent. Other expenses increased 24.6 per cent year on year, partly due to higher packaging costs.

Demand, Pricing and Realisation Outlook

Management reiterated its goal of double-digit volume growth in FY27 and remains constructive on medium-term demand in the East. It cited structural infrastructure drivers including shipbuilding, ports, data centres, shipyards and rail-corridor projects. Management also noted that housing and urban real estate account for about 55-60 per cent of India’s cement consumption.

Management expects cement prices to remain broadly stable through the monsoon quarter because cost escalation related to the West Asia conflict should support prices. Premiumisation and a higher blended-cement mix are expected to aid realisations.

Near-Term Cost Outlook and Operating Initiatives

Cost remains the key near-term concern. Management guided for a sequential cost increase of about Rs 130-140 per tonne in Q2 FY27, reflecting the full impact of the West Asia conflict, monsoon kiln maintenance and operating deleverage.

• Blended fuel cost increased to Rs 1.90 per kcal in Q1 FY27 from Rs 1.77 per kcal in Q4 FY26, and management expects it to reach about Rs 2 per kcal in Q2 FY27.
• Green power supplied about 47 per cent of total power requirements in Q1 FY27.
• Lead distance reduced by 7 km quarter on quarter to 360 km.
• The clinker-to-cement ratio improved to 1.5 times.

Capacity Expansion and New Businesses

UltraTech Cement commissioned 8.7 million tonnes per annum of capacity during Q1 FY27, taking domestic manufacturing capacity to 200.1 million tonnes per annum. Management plans about Rs 17,000 crore of capex over the next two years to raise installed capacity to 242.5 million tonnes per annum by FY28-end.

The company is undertaking Rs 2,000 crore of cost-efficiency capex at India Cements. A potential merger of India Cements into the standalone entity may be completed by Q4 FY28 after capex, non-core land disposals and operating alignment.

The cables and wires business remains on track for a Q3 FY27 product launch. Rs 888 crore has been spent or committed from approved capex of Rs 1,800 crore.

Earnings Estimates and Valuation

ICICI Securities retained its FY27E and FY28E EBITDA and EPS estimates, although it increased revenue estimates by 2.5 per cent and 2.9 per cent, respectively.

The broker values UltraTech Cement at 17 times March 2028E EV/EBITDA, based on FY28E consolidated EBITDA of Rs 21,636 crore and net debt of Rs 17,311 crore. This valuation leads to a target price of Rs 11,900 per share.

Key Risks and Catalysts

Downside Risks

• A sharp fall in cement prices.
• A major rise in fuel prices.
• Fuel-cost uncertainty and a weak FY27 monsoon forecast.
• Elevated competition amid potential industry capacity additions of about 180 million tonnes per annum over FY26-FY28.

Upside Risks

• A sharp increase in cement prices.
• A sharp decline in fuel costs.