Is UltraTech’s latest move into wires and cables a buying opportunity? Here’s what analysts said

Shares of UltraTech Cement Ltd., which have traded with losses for six-straight sessions, will be in focus on Thursday, February 27, after announcing a foray into the wires and cables business.

Analysts having coverage on the stock have projected up to 21% upside on the stock post the company’s announcement, although they do not see any significant impact on the incumbent wires and cables companies like Polycab, Havells, KEI Industries and others.

Brokerages Jefferies and UltraTech have a ‘buy’ rating on the stock with a price target of ₹13,265 and 13,100 apiece — an upside of 21.1% and 19.6%  —respectively.

UltraTech Cement will be setting up a Wires & Cables plant in Bharuch, Gujarat with a capex of ₹1,800 crore over the next two years. Investment in the unit will be financed via a mix of internal accruals and borrowings. The plant is expected to be commissioned by December 2026.

Also Read: Polycab, Havells, KEI and other wires and cable stocks should be on your radar today; Here’s why

Jefferies said the company’s announcement is a surprise, and that the targeted capex is 10% of its annual capex guidance.

The brokerage also said that while no specific inputs are available on product profile/target segments, the company is likely to leverage its manufacturing expertise and end-customers connects to scale up the new segment.

The capex is relatively small and appears more like deployment of burgeoning EBITDA-to-cash flow profile of the company, it added.

The brokerage said that any knee-jerk negative reaction in the stock price should be used as a buying opportunity.

Meanwhile, Citi noted that UltraTech’s foray into the segment is part of its strategy to strengthen its position as a comprehensive building solutions provider.

The brokerage said that while $200 million is small in the overall context, the foray into the segment could hurt UltraTech Cement’s positioning as a cement pure play, which is something to watch out for.

The company’s net debt stood at ₹16,200 crore post the India Cements open offer and its net debt in the last 12 months EBITDA is 1.2x, according to Citi.

Of the 42 analysts that have coverage on the stock, 34 have a ‘buy’ rating, five have a ‘hold’ rating and three have a ‘sell’ rating.

UltraTech Cement shares have been trading with losses for six-straight sessions. It ended the previous trade session 0.84% lower at ₹10,950 apiece. The stock has gained 10.04% in the past year.

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