UltraTech Cement Ltd Quarterly Results Q2 FY 26 stock analysis

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Sector Outlook: Positive

Long-term outlook remains strong despite near-term margin pressure

UltraTech Cement Ltd. reported revenue of ₹19,607 crore for the quarter ended September 2025, down 7.8% compared to the previous quarter but up 20.3% year-on-year, supported by 13.2% annual volume growth. The company sold 33.85 million tonnes of cement during the quarter, with domestic sales up 6.8% YoY, including Indian Cements. The average realisation per tonne stood at ₹5,088, slightly lower than last quarter but higher by 4.5% YoY. Costs increased due to higher maintenance, advertising spends, and raw material inflation, with raw material cost at ₹3,891 crore, logistics at ₹4,127 crore, power and fuel at ₹4,444 crore, and other expenses at ₹2,986 crore. These pressures impacted operating margins, leading to an EBITDA of ₹3,094 crore, down 29.8% QoQ but up 52.6% YoY, with margins at 15.8%. Net profit for the quarter was ₹1,238 crore, down 44.3% QoQ but up 74.9% YoY, with a profit margin of 6.3%. UltraTech added 3.5 MTPA of capacity, reduced its average lead distance to 366 km from 370 km, and improved its green energy mix to 41.6%, with renewable capacity at 1.19 GW and waste heat recovery capacity at 369 MW. Demand remained strong in the East and South, driven by infrastructure and housing activity, while the West, Central, and North saw weaker demand due to seasonal factors and delayed projects. Overall, UltraTech continues to strengthen its operations and sustainability efforts, positioning itself for steady long-term growth despite near-term cost pressures.

Valuation and Outlook

Despite a softer quarter, UltraTech Cement continues to maintain its leadership in the Indian cement industry. The company remains focused on creating long-term value through operational efficiency, disciplined cost control, and capacity expansion. Its recently announced 22.8 MTPA capital expenditure plan underlines management’s confidence in sustained cement demand, driven by India’s infrastructure development and housing growth. Continued efforts to optimise logistics and increase green power usage demonstrate UltraTech’s commitment to cost competitiveness and sustainability. The integration of newly acquired assets such as India Cements and Kesoram is progressing well, expected to enhance profitability in the coming quarters. Moreover, consistent investments in debottlenecking and brownfield projects ensure capacity growth remains aligned with India’s infrastructure momentum. While near-term profitability was affected by maintenance and one-off costs, the company’s fundamentals remain strong, supported by healthy demand in key markets. With a pan-India presence, prudent capital allocation, and a positive long-term demand outlook, UltraTech is well positioned to capture higher market share, deliver steady volume growth, and improve margins in the coming quarters.

Key concall Highlights

UltraTech Cement plans to end the financial year with a total cement capacity of 200 million tonnes, driven by major expansions across the North (18 MT) and West (4.8 MT) regions. The company aims to increase its clinker capacity to 148 MT with a conversion ratio of 1.6x post-expansion and sees scope for an additional 20–25 MT beyond FY29 through greenfield projects. These expansions will be funded mainly through internal accruals, keeping net debt/EBITDA below 0.7x. The assets of India Cements are being upgraded from 14.45 MT to 17.55 MT via brownfield projects, while Kesoram is undergoing a ₹500 crore CapEx for WHRS and efficiency upgrades, with brand integration expected by June 2026. UltraTech expects to maintain an annual CapEx of ₹10,000 crore for the next two years, focusing on high-demand infrastructure zones such as Vadhavan Port, Amravati, the new Mumbai Airport, and data centers. India Cements’ debottlenecking and renewable energy projects are expected to deliver IRRs above 20%, with clinker additions of 15.68 MT at a cost below ₹500 crore per tonne. Despite monsoon disruptions, UltraTech sold over 31 MT of cement in Q2, achieving 13.2% annual growth in its flagship brand and around 13% growth in rural markets, which are expected to expand by 10% industry-wide. With GST 2.0 expected to make premium cement more affordable, demand for branded cement is likely to rise. UltraTech operates 75 locations and 400+ RMC plants, contributing about 4% to total volumes, along with a strong retail base of 5,000 UBS stores, accounting for 21% of quarterly sales. The company has also exited its coal assets in Indonesia, and proceeds from the sale will support debt reduction for India Cements.