UltraTech Cement share price to give 10% returns in one month; Experts say this is a share to buy

UltraTech Cement share price has underperformed the Sensex by 10 per cent over the past three months due to weak cement demand and the dismal performance of the acquired Century Cement assets in Q2FY20.  In this note, stock market experts present a premise for their expectation of an improvement in profitability via case studies on the turnaround of the other two acquisitions – JPA and Binani. With limited capex needs going forward, strong FCF generation (near 7 per cent yield) will likely drive deleveraging and 550 bps improvement in RoE over the next two years. According to the market experts, UltraTech Cement share price is expected to rise 10 per cent in one month. Asked about the reason for such a rise in UltraTech Cement share price, experts say technical reason behind such upside expected a swing in the counter.

Speaking on the UltraTech Cement share price outlook, Sumeet Bagadia, Executive Director at Choice Broking said, "The UltraTech Cement share price technical chart is showing upside swing for around 10 per cent from current levels. One can buy the UltraTech Cement shares for the immediate target of Rs 4,450 to Rs 4,500 in next fifteen days while in one month's time it is expected to go upward by near 10 per cent from current market price." However, strictly Bagadia advised stock market investors to maintain stop loss at Rs 4,100 if they take any buy position in the UltraTech Cement shares.

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Giving fundamental details of the UltraTech Cement shares Amit Murarka, Research analyst at Motilal Oswal said, "Profitability improvement of UltraTech Cement will primarily be driven by lower costs with better fixed cost absorption (as utilization improves from 48 per cent in Q2FY20), reduced energy costs (higher petcoke usage and lower cost) and freight cost savings (through logistics realignment)." He said that RoE of the UltraTech Cement is expected to rise by  more than 550bp to 13.8 per cent over FY19-21, driven by strong growth in EBITDA (26 per cent CAGR) and lower interest costs from deleveraging. On his suggestion to the share market investors in regard to the UltraTech Cement stocks Murarka strongly advised 'Buy.'