Ultratech Cements is part of the Kumaramangalam Birla group and is the largest and the most valuable cement company in India.

A smart doubling of profits in Q4

For the fourth quarter ending March 2019, the net profits of Ultratech doubled to Rs.1034 crore on better off take of cement and also better pricing power for cement companies. Even the sales of the company were up by 17% at Rs.10,905 crore in the fourth quarter, showing good traction in volumes. This quarter is also higher because of the consolidation of the Jaypee Cements and Jaiprakash Associates numbers. The company also expects to consolidate the Century cement operations which will make Ultratech the 3rd largest cement manufacturer in the world outside of China..

Is it worth buying Ultratech at current valuations?

The stock has rallied nearly 30% from the lows of October last year and is now trading very close to its yearly highs at Rs.4432. In terms of valuations, the stock has been always among the most expensive in P/E terms and currently quotes at nearly 60X rolling earnings. This is against an industry average of around 15X P/E. While we see Ultratech emerging as a veritable play in cement and cement prices to support the company, the stock does look richly priced with limited upside potential. One can wait for lower levels or corrections in the stock to buy into Ultratech.