Cement · investment research
UltraTech Cement
ULTRACEMCO
Verdict
AVOID
low confidence · 3-5 years
Composite score
31/100
Weighted across all eight pillars
Business quality
33/100
Moat, returns, balance sheet, cash, management
Valuation score
54/100
At 11.4x against a sector median of 28.9x, the price embeds roughly 0% earnings growth. Anything less has to come out of the multiple.
Decision intelligence
Every conclusion states what would make it wrong
WHAT
Avoid for now — the business or governance risk outweighs the opportunity.
WHY
- • Balance sheet scores 0/100 (stable) — Leverage is high enough that a demand shock becomes a solvency question.
- • Profitability & returns scores 1/100 (stable) — ROCE was 6.2% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- • Growth quality scores 12/100 (deteriorating) — Top-line compounding over the reported history.
- • Management & governance scores 65/100 (stable) — Whether management historically delivered what it promised.
WHERE
Cement · Large cap · position sized to at most 0% of an equity portfolio.
WHEN
Re-run this analysis after the next quarterly result.
WHAT IF WRONG
- • The thesis is wrong if ROCE falls below 6% or cash conversion stays under 70% for two straight quarters.
- • Valuation support fails below ₹4,691 of fair value — a drawdown to that level is a re-underwrite, not automatically a buy.
- • Watched risk: Leverage — Debt is 11.7x EBITDA.
WHAT NEXT
- • Read the latest quarterly cash-flow statement alongside the P&L.
- • Check GDP growth — it moves the earnings base independently of execution.
- • Compare against the sector peers listed below before sizing anything.
UltraTech Cement is a competitively exposed cement business compounding revenue at 4.5% and profit at -14.4%, earning 5.7% on capital. Quality scores 33/100 and valuation 54/100 at 11.4x. The decision is therefore avoid with low confidence — this is analysis for learning, not investment advice.
What does this business actually do?
Business understanding before ratios
UltraTech Cement operates in the Indian cement sector with a large-cap footprint and a listed market value of about ₹324k Cr.
Revenue is earned across 4 reported segments; profitability is driven by realisations, mix and operating leverage rather than one-off items.
Revenue drivers
- • Volume growth in the core segment
- • Realisation / pricing power
- • Mix shift toward higher-margin lines
- • Capacity utilisation
Cost drivers
- • Raw material and input costs
- • Employee cost inflation
- • Interest cost on borrowings
- • Distribution and marketing spend
Moat · 32/100
Regulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
Segment mix
Growth 34.1% · margin 27.4% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 10.8% · margin 7.9% — Growing broadly in line with the overall business.
Growth 28.5% · margin 18.3% — Fastest growing part of the mix — watch whether margins hold as it scales.
Growth 11.8% · margin 10.4% — Growing broadly in line with the overall business.
Analysis pillars
Score, trend and the drivers behind each — no bare numbers
Business & moat
39/100Trend: improving · weight 14%
- MoatRegulatory / licence moat
Approvals and order pipelines limit how quickly new entrants can compete.
- Segment concentrationGrey cement is 37.5% of revenue
Revenue is spread across segments, which softens single-market shocks.
- EBITDA margin19.0%
Margin moved from 18.0% to 19.0% year on year.
Profitability & returns
1/100Trend: stable · weight 16%
- ROCE5.7%
ROCE was 6.2% a year ago. Sustained ROCE above the cost of capital is what compounds value.
- ROE5.7%
Return on equity after leverage — read alongside debt levels.
- Net margin8.5%
Share of every rupee of revenue that reaches reported profit.
Growth quality
12/100Trend: deteriorating · weight 15%
- Revenue CAGR (4y)4.5%
Top-line compounding over the reported history.
- Profit CAGR (4y)-14.4%
Profit lags revenue, so growth is being bought with margin.
- Growth sourceAsset-light / incremental
Capex is 9.0% of revenue this year.
Balance sheet
0/100Trend: stable · weight 12%
- Debt / EBITDA11.74x
Leverage is high enough that a demand shock becomes a solvency question.
- Debt / equity1.80x
Capital structure relative to shareholder funds.
- Working capital95 days
Long cycle: each rupee of growth locks up more cash.
Cash conversion
58/100Trend: stable · weight 13%
- OCF / PAT93%
Reported profit is backed by operating cash.
- Free cash flow₹-639 Cr
Cash left after maintaining and expanding the asset base.
Management & governance
65/100Trend: stable · weight 14%
- Guidance delivery81% of last 8 quarters
Whether management historically delivered what it promised.
- Promoter holding52.1% (-0.09 y/y)
Promoter ownership is stable or rising.
- PledgeNo pledge
No pledge disclosed in the sample data.
- Institutional flowFII +0.93 · DII +0.95
Direction of institutional ownership over the last year.
- Capital allocationGrowth has been part-funded with debt; increment…
Growth has been part-funded with debt; incremental returns need to clear the cost of that debt.
Industry & macro
38/100Trend: deteriorating · weight 8%
- Demand trenddeteriorating
Cement (India) demand is deteriorating.
- StructureConsolidated
Consolidated — a few large players hold most of the profit pool.
- Competitive intensitylow
How hard it is to keep pricing and share.
- Macro driversGDP growth, Inflation, Interest rates
Variables that move the earnings base regardless of company execution.
Valuation
54/100Trend: stable · weight 8%
- P/E vs sector11.4x vs 28.9x
At 11.4x against a sector median of 28.9x, the price embeds roughly 0% earnings growth. Anything less has to come out of the multiple.
- Growth-adjusted11.40 (PE/growth)
Below ~1.5 the multiple is supported by growth; above ~2.5 it depends on the market staying optimistic.
- FCF yield-0.20%
Cash return on the current market value, before any growth.
Financial history
Profit, cash and returns over five reported years
| Year | Revenue | EBITDA | PAT | OCF | FCF | ROCE |
|---|---|---|---|---|---|---|
| FY2022 | ₹51,185 Cr | ₹13,308 Cr | ₹9,715 Cr | ₹8,258 Cr | ₹1,604 Cr | 8.3% |
| FY2023 | ₹53,629 Cr | ₹9,117 Cr | ₹6,017 Cr | ₹5,235 Cr | ₹408 Cr | 7.5% |
| FY2024 | ₹56,073 Cr | ₹9,532 Cr | ₹5,147 Cr | ₹4,581 Cr | ₹-1,026 Cr | 7.5% |
| FY2025 | ₹58,517 Cr | ₹10,533 Cr | ₹5,161 Cr | ₹4,697 Cr | ₹-3,495 Cr | 6.2% |
| FY2026 | ₹60,961 Cr | ₹11,583 Cr | ₹5,212 Cr | ₹4,847 Cr | ₹-639 Cr | 5.7% |
- ⚠ Working capital cycle is long; growth consumes cash.
Ownership & management
Who owns it, and have they delivered?
Promoter
52.1%
-0.09 y/y
Pledge
None
No disclosed pledge
FII
5%
+0.93 y/y
DII
25.6%
+0.95 y/y
Guidance delivered in 81% of the last eight quarters; average leadership tenure 12 years.
Growth has been part-funded with debt; incremental returns need to clear the cost of that debt.
- ⚠ Related-party transactions at 7.5% of revenue
Industry & macro context
Cement (India)
Demand trend
deteriorating
Cyclicality
high
Competition
low
Regulatory pressure
medium
Consolidated — a few large players hold most of the profit pool.
Macro drivers: GDP growth · Inflation · Interest rates
Valuation
fair versus the sector
P/E
11.4x
Sector median P/E
28.9x
P/B
1.96x
Earnings yield
8.77%
FCF yield
-0.2%
PE / growth
11.4
Estimated fair-value band ₹4,691 – ₹5,994 , built on FY2026 EPS of ₹180.8. Gap to the current price: -52.5%. Ranges are a modelling output, not a target price.
At 11.4x against a sector median of 28.9x, the price embeds roughly 0% earnings growth. Anything less has to come out of the multiple.
Risk register
What can break the thesis, and how it is monitored
- Leveragehigh
Debt is 11.7x EBITDA.
Monitor: Quarterly gross debt and interest coverage.
- Cyclicalitymedium
Cement (India) earnings swing with the cycle, so trailing numbers flatter the peak.
Monitor: GDP growth
- Governancehigh
Related-party transactions at 7.5% of revenue
Monitor: Annual report disclosures and auditor commentary.
- Accounting qualitymedium
Working capital cycle is long; growth consumes cash.
Monitor: Cash-flow statement versus P&L each quarter.
Ongoing thesis monitoring
The thesis is a living position, not a one-time verdict
| Metric | Currently | Thesis holds if | Thesis breaks if |
|---|---|---|---|
| ROCE | 5.7% | stays above 6% | falls for two consecutive years |
| Cash conversion | 93% | stays above 80% | drops below 70% while revenue grows |
| Revenue growth | 4.5% CAGR | tracks the 0% priced in | slows for two quarters with no margin offset |
| Promoter holding | 52.1% | stable or rising | falls sharply or fresh pledge appears |
Peers in the same sector
Compare before sizing anything
Data quality 58/100
Stated openly, as required by the product principles
- • Fundamentals in this build come from a deterministic sample dataset, not licensed exchange filings.
- • Segment, ownership and management figures are illustrative and must be verified against annual reports.
- • Educational analysis only — not a recommendation to buy or sell any security.
- • Accounting flags reduce the reliability of the reported profit base.