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    Buy UltraTech Cement Ltd. target Rs 4,750 : Sharekhan

    Synopsis

    Buy UltraTech Cement Ltd. at a price target of Rs 4750.

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    Sharekhan has a buy call on UltraTech Cement Ltd. with a target price of Rs 4,750. The current market price of UltraTech Cement Ltd. is Rs 3661.4. Time period given by the brokerage is a year when UltraTech Cement Ltd. price can reach defined target.
    UltraTech Cement Ltd., incorporated in 2000, is a large-cap cement company with a market cap of Rs 101609.92 crore.

    Investment rationale by Sharekhan
    UltraTech plans to add 13.4 mtpa capacity inorganically: The board of directors of UltraTech Cement has approved acquisition of 13.4 mmt of cement assets of Century Textiles and Industries (Century) for an enterprise value (EV) of Rs. 8,621 crore (11.4 integrated units at $106/tonne and 2 mt grinding unit at $40/tonne). The deal is valued at 17x its EV/EBITDA on FY2018 earnings. The transaction includes equity value of Rs. 5,621 crore (valued at Rs. 4,026/share) and likely debt takeover of Rs. 3,000 crore. The equity dilution of UltraTech is expected to be 5.1% (1.4 crore new shares issue) at a share swap ratio of one share of UltraTech for every eight shares of Century Textiles. The deal is expected to be completed by January-March 2019, subject to regulatory approvals
    At this juncture, we have not included the transaction in our financial estimates and valuation of UltraTech as the deal is yet to go through regulatory approvals, while we await further clarity on the accrual of synergistic benefits arising from the said acquisition. We maintain our Buy rating on the stock with a price target of Rs. 4,750.
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