ULTRACEMCO - Fundamental Analysis: Financial Health & Valuation

Last Updated Time : 20 Dec 25, 11:16 pm

Fundamental Rating: 3.5

📊 Financials: UltraTech Cement (ULTRACEMCO) shows moderate fundamentals with ROCE at 11.7% and ROE at 9.69%, reflecting average efficiency in capital utilization. Debt-to-equity is 0.30, indicating manageable leverage. Quarterly PAT declined sharply (₹1,064 Cr vs ₹2,232 Cr), showing earnings pressure despite a reported profit variation of 56.5%. EPS stands at ₹249, supporting profitability but highlighting volatility.

💰 Valuation: Current P/E of 46.4 is significantly above the industry average of 33.2, suggesting premium valuation. Book value is ₹2,401, giving a P/B ratio of ~4.8, which is moderately high. PEG ratio is negative (-14.0), reflecting weak earnings growth relative to valuation. Dividend yield at 0.68% provides modest income support.

🏢 Business Model & Advantage: UltraTech Cement operates as India’s largest cement manufacturer with strengths in capacity, distribution, and brand presence. Competitive advantage lies in scale, pan-India reach, and cost efficiencies. However, profitability pressures and stretched valuations reduce margin of safety.

📈 Entry Zone: Current RSI at 41.5 suggests neutral-to-oversold conditions. An attractive entry zone lies between ₹10,200–₹10,600, closer to support levels and below DMA 50 & DMA 200, offering margin of safety.

🕰️ Long-Term Holding: Suitable for long-term investors due to strong industry positioning and demand outlook. However, valuations are stretched, making staggered accumulation advisable during corrections.

Positive

• ✅ India’s largest cement manufacturer with strong brand presence
• ✅ Manageable debt-to-equity (0.30)
• ✅ EPS of ₹249 supports profitability visibility
• ✅ Pan-India distribution and scale advantage

Limitation

• ⚠️ Weak ROCE (11.7%) and ROE (9.69%)
• ⚠️ High P/E (46.4) vs industry average (33.2)
• ⚠️ Negative PEG ratio (-14.0)
• ⚠️ Dividend yield modest at 0.68%

Company Negative News

• 📉 Quarterly PAT dropped significantly (₹1,064 Cr vs ₹2,232 Cr)
• 📉 Decline in DII holdings (-0.20%)
• 📉 Weak technical momentum (MACD -85.9, below DMA 50 & DMA 200)

Company Positive News

• 📈 Increase in FII holdings (+0.10%)
• 📈 Strong industry positioning with pan-India reach

Industry

• 🌐 Cement sector supported by infrastructure growth and housing demand
• 🌐 Industry PE at 33.2, showing UltraTech trades at premium valuation

Conclusion

🔎 UltraTech Cement is a market leader with strong brand presence, scale advantage, and pan-India distribution. However, profitability pressures and stretched valuations reduce near-term attractiveness. Investors may consider accumulation near ₹10,200–₹10,600 for margin of safety, with long-term holding favorable given infrastructure-led demand growth.

Would you like me to extend this with a peer benchmarking overlay against Shree Cement, Ambuja Cement, and Dalmia Bharat, or a sector rotation basket scan to identify undervalued cement peers for compounding?