News
Cement major UltraTech Cement Ltd has announced the acquisition of an 8.69% stake in Star Cement Ltd for Rs 851 crore. This deal involves the purchase of up to 3.7 crore equity shares at a price not exceeding Rs 235 per share, excluding taxes and other levies.
Star Cement’s promoters and promoter group entities proposed selling their equity holdings, which led to UltraTech Cement’s investment decision. The transaction was approved during UltraTech Cement’s board meeting earlier on December 27. This move marks UltraTech’s strategic investment in a non-controlling minority stake in the company.
Additionally, Star Cement witnessed a significant trade of 3.36 crore shares or 8.3% equity, worth Rs 766 crore, exchanged hands in a block deal window. As a result, shares of Star Cement surged over 7% to Rs 247.30 during early trade.
Earlier this month, on December 20, the Competition Commission of India approved UltraTech Cement Limited’s acquisition of India Cements Limited (ICL). In July this year, UltraTech Cement had announced the acquisition of a 32.72% stake in India Cements from promoters and their associates in a Rs 3,954 crore deal, aiming to expand its footprint in the southern cement market, particularly Tamil Nadu.
This move aligns with UltraTech’s broader strategy to consolidate its position in the highly competitive Indian cement industry, which expects around 8% sales growth in 2025, driven by increased government spending on infrastructure projects.
Fundamental Analysis
Company Essentials
- Market Cap: ₹ 3,28,395.49 Cr
- Enterprise Value: ₹ 3,35,712.32 Cr
- Number of Shares: 28.87 Cr
- Face Value: ₹ 10
Key Ratios
- P/E Ratio: 50.89 (Overvalued)
- P/B Ratio: 5.45
- Dividend Yield: 0.62%
- Book Value (TTM): ₹ 2,085.74
- ROE: 12.30%
- ROCE: 15.75%
Financial Highlights
- CASH: ₹ 770.50 Cr
- DEBT: ₹ 8,087.33 Cr
- Promoter Holding: 59.99%
- EPS (TTM): ₹ 223.54
- Sales Growth: 12.09%
- Profit Growth: 39.45%
Financial Ratios
- Return on Assets (ROA): 7.46% (Needs improvement)
- Current Ratio: 0.84 (Low)
- Debt-to-Equity Ratio: 0.14 (Healthy Capital Structure)
- Operating Margin: 18.39%
- Dividend Yield: 0.62%
Valuation Summary
- PE Ratio: UltraTech Cement’s PE ratio of 50.89 suggests the stock is relatively overvalued. Investors should exercise caution when buying at such high multiples.
- ROA: At 7.46%, the company’s ability to convert assets into profit is below expectations.
- Debt: With a low debt-to-equity ratio of 0.14, UltraTech Cement’s capital structure remains strong and stable.
Technical Analysis
Chart Overview
Below is the 1-day chart of UltraTech Cement:
- Current Price: Rs 11,406.55
- Key Moving Averages:
- 9 EMA: Rs 11,544.25
- 50 EMA: Rs 11,448.91
- 100 EMA: Rs 11,313.52
The price is currently below the 9 EMA but trading near the 50 EMA, indicating possible consolidation. A breakdown below the 100 EMA could trigger further bearish momentum.
Observations:
- Support Levels: Rs 11,300, Rs 11,000
- Resistance Levels: Rs 11,600, Rs 12,000
- Volume Analysis: Volume is relatively stable, indicating no major disruptions or unusual activity.
Short-Term Trade Plan
Strategy:
- Entry Point: Rs 11,450 (near the 50 EMA if the price consolidates)
- Target 1: Rs 11,700
- Target 2: Rs 12,000
- Stop Loss: Rs 11,300
Risk-Reward Ratio:
With a stop loss of Rs 150 and a potential reward of Rs 300-550, the trade setup offers a favorable 1:2 or higher risk-reward ratio.
Long-Term Trade Setup
Investment Thesis:
UltraTech Cement remains a leader in the Indian cement industry and is strategically expanding through acquisitions. The growing demand for cement in infrastructure projects and southern market expansion solidify its long-term growth potential.
Long-Term Strategy:
- Accumulation Zone: Rs 10,800 – Rs 11,200
- Target Price: Rs 14,000 in the next 18-24 months
- Stop Loss: Rs 10,500
Conclusion
UltraTech Cement is a fundamentally strong company with strategic growth initiatives. While the stock appears overvalued in the short term, its leadership in the cement industry, robust capital structure, and expanding footprint position it well for long-term investors. Traders should closely monitor the technical levels and volume activity for the next breakout or consolidation phase.
Disclaimer
This analysis is for informational purposes only and should not be considered as financial advice. Always do your own research or consult a financial advisor before investing.
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