Cement producer UltraTech Cement share price climbed up to 3.5 per cent on Monday, March 3, following the company’s detailed announcement about its entry into the cables and wires segment on Friday. The stock is rebounding after experiencing a significant sell-off on Thursday and Friday last week.
At 12:25 pm, UltraTech Cement shares was trading at ₹10,412.75, up over 3 per cent. The stock closed at ₹10,114 apiece on Friday.
UltraTech’s planned entry into the cables and wires sector with an investment of ₹1,800 crore resulted in a nearly $4 billion decline in the market capitalization of companies such as Polycab, KEI Industries, and their peers.
In an investor presentation released on Friday evening, UltraTech clarified that it aims for an internal rate of return (IRR) of approximately 25 per cent, with a Return on Capital Employed (RoCE) target exceeding 20 per cent. The product mix for its wires and cables segment will consist of 60 per cent wires and 40 per cent cables.
UltraTech emphasized that it is not exploring any new business opportunities and does not anticipate pricing pressure to impact the industry. The company described this initiative as a one-time strategic diversification aimed at capturing a larger share of customer spending.
Buy or sell?
Brokerage firm Jefferies has also reaffirmed its “buy” rating on UltraTech, setting a price target of ₹13,265. The brokerage expressed confidence in the company’s future capital allocation strategy, based on insights from the management’s commentary.
Meanwhile, Nuvama has reaffirmed its “hold” rating on UltraTech, setting a price target of ₹11,574. “UltraTech Cement, at its investor call, impressed upon a well thought-out strategy of foraying into C&W, optimum utilisation of C&W facility by FY31E, along with industry-level operating margin by FY31E, initially low due to A&P and minimal working capital,” the brokerage firm said.
The stock is attempting a recovery after an eight-day losing streak, having dropped nearly 8 per cent over the past two trading sessions.
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