UltraTech’s Q1 has bright spots, but margin pressures linger

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UltraTech Cement’s performance in the seasonally weak June quarter (Q1FY27) broadly met expectations. A key highlight of the industry bellwether’s results was that it maintained Ebitda per tonne above ₹1,200 for the second consecutive quarter despite elevated input costs amid geopolitical tensions.

Consolidated Q1FY27 Ebitda per tonne stood at ₹1,214, flat year-on-year but lower sequentially. UltraTech is targeting Ebitda per tonne of ₹1,400 in Q4FY28, factoring in no war-related crisis.

Volumes grew 12% year-on-year to 41.3 million tonnes (mt), led by demand from the housing and rural segments, translating into 16% revenue growth. Domestic grey cement sales rose 13% to 39.2mt. Industry volume growth was 7-8%, according to the management, indicating market share gains for UltraTech.

Post Q1 results, many brokerages have maintained or marginally tweaked UltraTech’s FY27 earnings estimates. However, larger re-rating triggers, if any—primarily cement price hikes—can emerge only in H2FY27.

“The robust quarterly performance, as well as upbeat management commentary, does not inspire confidence to pursue any earnings upgrade just yet,” said ICICI Securities.

The monsoon typically keeps cement demand and prices subdued in Q2. Investors will therefore closely track how UltraTech manages cost pressures alongside the ramp-up of acquired assets and capacity additions.

Fuel costs rose by ₹40 per tonne and packaging costs by ₹50–60 per tonne sequentially in Q1FY27. Fuel consumption cost stood at ₹1.90/kcal versus ₹1.78/ ₹1.77 per kcal in Q1/Q4FY26. In Q2FY27, it is expected to touch ₹2/kcal, likely marking the peak, as UltraTech has already procured inventory.

Q2 profitability will reflect the full-quarter impact of higher fuel costs, the monsoon season and scheduled kiln maintenance. Overall cost inflation is expected to increase sequentially by ₹130–140 per tonne.

UltraTech’s consolidated operating cost increased sequentially by ₹235 per tonne in Q1FY27, while several regional peers reported cost inflation of nearly ₹300–400 per tonne, highlighting UltraTech's superior cost discipline, said Nirmal Bang Institutional Equities.

To mitigate cost pressures, UltraTech is increasing the use of renewable energy and improving logistics and distribution efficiencies. It remains hopeful that cost pressures will ease in H2FY27, assuming the West Asia crisis de-escalates.

The company has reiterated its target of double-digit grey cement volume growth in FY27.

Cement prices improved sequentially in Q1FY27, led by the east and south, while prices in the central and western regions remained stable. The north continued to perform consistently. Management expects prices to remain broadly stable during the monsoon amid elevated industry cost pressures.

UltraTech commissioned 8.7mtpa of new capacity in Q1FY27, taking domestic grey cement capacity to 200.1 million tonnes per annum (mtpa) and total cement capacity to 205.5mtpa. Grey cement capacity is expected to rise to 207mtpa by FY27-end and 237mtpa by FY28-end.

Its continued focus on timely capacity additions bodes well for volume growth visibility.

However, concerns on price hikes and stiff competition are likely to stay.

ICICI Securities expects competitive intensity to remain elevated amid the potential addition of around 180mtpa of industry capacity between FY26 and FY28. It also flagged a weak monsoon forecast for FY27 as a concern.

UltraTech has guided for capital expenditure of ₹17,000 crore over the next two to three years, to be funded through internal accruals. For its wires and cables venture, the company has spent around ₹900 crore till June out of the approved investment of ₹1,800 crore.

So far in 2026, UltraTech’s shares have remained largely flat and trade at an FY28 EV/Ebitda multiple of around 16 times. That valuation is hardly attractive given the backdrop of expected near-...