UltraTech Cement gains market share as cost efficiencies support margins and cash flow

Investment View and Valuation

In its August 11, 2026 company update, Motilal Oswal Financial Services Ltd. reiterates its BUY view on UltraTech Cement. The broker cites the company’s expanding scale, market-share gains, structural cost advantage, acquisition-integration potential and strong cash generation.

UltraTech Cement’s diversified manufacturing and distribution footprint is expected to help it capture a disproportionate share of cement-industry growth while lowering operating cost per tonne. Integration of ICEM and Kesoram is viewed as an additional margin opportunity as these operations move towards UltraTech Cement’s efficiency levels.

MOFSL values UltraTech Cement at 18 times FY28E EV/EBITDA to derive a target price of Rs 13,800, compared with the CMP of Rs 11,780.

Market-Share Gains and Regional Leadership

UltraTech Cement’s domestic grey-cement volume CAGR of 13.4 per cent over FY22-FY26 exceeded the industry’s approximately 8 per cent CAGR and that of most covered peers, according to MOFSL. In Q1 FY27, domestic grey-cement volumes rose approximately 13 per cent year on year, compared with estimated industry growth of 7-8 per cent, indicating ongoing market-share gains.

MOFSL estimates that UltraTech Cement’s market share will rise to approximately 32 per cent by FY28 from approximately 30 per cent in FY26. The company has capacity leadership across multiple regions.

Capacity Expansion and Volume Outlook

UltraTech Cement had domestic grey-cement capacity of 200.7 mtpa and is targeting 237.1 mtpa by FY28. The expansion plan includes additions of 6.6 mtpa in the first nine months of FY27 and 29.8 mtpa in FY28.

MOFSL expects average grinding-capacity utilisation of around 80 per cent and consolidated sales-volume CAGR of approximately 10 per cent over FY26-FY28. The broker views the expansion programme, supported by the company’s strong balance sheet, as a key driver of sustained market-share gains.

Structural Cost Advantage and Margin Drivers

MOFSL identifies UltraTech Cement’s structural cost position as a major competitive advantage. Its network supports optimisation of clinker movement, logistics and plant utilisation, while procurement scale reduces costs across fuel, freight, spares and other operating inputs.

Integrated manufacturing, captive power and a rising renewable-energy mix further support cost competitiveness. Cost-efficiency programmes generated a cumulative benefit of Rs 185 per tonne during FY25 and FY26 through shorter lead distances, greater green-energy use, a better clinker-to-cement ratio and lower power and heat consumption. Management expects to exceed its cost-saving guidance of Rs 300 per tonne by FY28.

Near-term cost pressure is expected from higher fuel costs and seasonality, with fuel costs likely to peak in Q2 FY27. Efficiency gains are expected to begin reflecting in the second half of FY27. Industry price hikes are expected to remain gradual and calibrated because of ongoing capacity additions and competitive intensity.

FY26 Financial Performance

UltraTech Cement reported FY26 consolidated revenue of Rs 88,512 crore, EBITDA of Rs 17,020 crore and adjusted PAT of Rs 8,270 crore. EBITDA margin improved to 19.2 per cent.

Operating cash flow rose approximately 43 per cent year on year to Rs 15,300 crore, ahead of EBITDA growth of approximately 36 per cent. This resulted in operating-cash-flow-to-EBITDA conversion of approximately 90 per cent. MOFSL notes that cash conversion remained in an approximately 80-100 per cent range over FY21-FY26, aided by working-capital discipline.

Forecasts, Cash Flow and Balance Sheet

For FY26-FY28, MOFSL forecasts consolidated revenue, EBITDA and PAT CAGRs of approximately 12 per cent, 17 per cent and 19 per cent, respectively. It estimates operating margin will expand by 1.5 percentage points to approximately 21 per cent by FY28.

MOFSL forecasts cumulative operating cash flow of Rs 33,100 crore and capex of Rs 20,000 crore over FY27-FY28, resulting in cumulative free cash flow of Rs 13,100 crore.

Net debt is expected to peak at Rs 18,500 crore in FY27 before declining from FY28. Net debt-to-EBITDA is expected to remain below 1.0 times through FY27-FY28.