UltraTech Cement Ltd shares are poised for a significant gain, with Choice Institutional Equities projecting a 34.22 percent upside from current market prices. The brokerage has set a 12-month target price of Rs 15,210 per share for UltraTech, assessing the stock at Rs 11,332 and reaffirming its status as a preferred large-cap cement play.
Strategic Diversification into Cables and Wires
A key factor underpinning this optimistic outlook is UltraTech's Rs 1,800 crore foray into the cables and wires (C&W) segment. Choice Institutional Equities highlighted this move as strategically and directionally positive, noting it represents a measured entry into an adjacent category rather than an aggressive diversification bet.
The investment, while substantial, accounts for approximately 2 percent of the company's current capital employed, indicating a relatively modest allocation proportional to its overall balance sheet strength.
Ambitious Market Share and Revenue Targets
UltraTech Cement aims to capture a 6-7 percent share of the domestic C&W market by fiscal year 2030. According to Choice's estimates, at full capacity utilisation, which could be achieved around FY30-31, the wires and cables business has the potential to generate annual revenue of approximately Rs 9,000 crore. This would translate into an estimated asset turnover of around 5 times.
Projected Profitability and Shareholder Value
Assuming an EBITDA margin of 10-12 percent, consistent with established industry players, Choice estimates that the C&W business could deliver an asset-level return on capital employed (ROCE) exceeding 20 percent at peak utilisation. The brokerage's calculations also suggest shareholder returns of approximately 8 percent, indicating that the project is likely to be value accretive for UltraTech Cement.
Choice Institutional Equities noted that the C&W business compares favorably with several alternative capital deployment opportunities available to the company.
Valuation Methodology and Future Considerations
The brokerage values UltraTech Cement using an EV/CE-based methodology, assigning a 3.8x FY28E EV/CE multiple to arrive at the Rs 15,210 target price. Importantly, Choice stated that its current valuation does not yet factor in any potential value accretion from the new wires and cables foray. The brokerage prefers to monitor the execution and progress of the new business before incorporating its contribution into future valuations.
UltraTech Cement continues to be Choice's preferred large-cap cement play, supported by its superior long-term earnings visibility and strong execution capabilities across its core business.