UltraTech Cement (NS:ULTC): We maintain ADD on UltraTech (UTCEM) with an unchanged target price of INR 11,260 (valuing the cement business at 16.5x Sep-26E consolidated EBITDA and investment in India Cements (NS:ICMN) at 1x BV). In Q2FY25, UTCEM’s consolidated volume rose 4% YoY. However, subdued demand and continued competitive pressure led to a 3% fall in grey cement realisation (blended 1% fall). Further, op-lev loss and higher maintenance and employee expenses pulled down the margin further by INR 225/MT QoQ to INR 725/MT. On the positive side, its fuel cost continues to moderate and the share of low-cost green power is rising at a fast pace. UTCEM’s capacity will rise by 11% CAGR to 202mn MT by FY27E (ex-India Cements). We estimate UTCEM to deliver 11% volume CAGR (ex-India Cements) over FY24-27E and unit EBITDA to expand to INR 1,349 in FY27E.
Oberoi Realty (NS:OEBO): Oberoi Realty (ORL) registered presales of INR 14.4bn (+49.5%/+35.2% YoY/QoQ); it was largely backed by sales from 360W contributing 40% of presales, followed by Elysian and Enigma. 360W saw a good amount of traction in Q2FY25 with sales of 6 units (vs 6/4units in Q1FY25/Q2FY24; H1FY25: 12 units) totalling INR 6.6bn and for H1FY25 INR 11.4bn, we believe that ORL would likely be able to sell its 360W inventory over the next 18-24 months. Average price realisation (ASP) at INR 52.4k psf (+20%/+3% YoY/QoQ) is likely aided by rising contribution from 360W. The Pokhran project has finally been launched and saw an overwhelming response with c.50% (INR 13.5bn) of inventory getting sold out within 3 days of the launch. Commerz 3 has seen continued interest, with over 51% of the area leased to Morgan Stanley (NYSE:MS) and as of Sept’24, 100% of the space is expected to be leased out by FY25 end. Additionally, ORL is prepared to launch the final phases of its Borivali and Goregaon projects during H2FY25. Borivali Mall is expected to start its operation by Dec 2024, with a leasing occupancy of >80% by Q1FY26. Regarding recent business developments in Tardeo, Gurgaon, and Adarsh Nagar, ORL plans to launch these projects by Q1FY26/Q2FY26. Given the expected robust cash flows from ready-to-move-in inventory in the 360W and likely fundraising of INR 60bn, we remain constructive on ORL and maintain BUY. We increase our NAV-based TP to INR 2,302/sh to factor in better-than-expected pricing and presales growth.
Dalmia Bharat (NS:DALB): We maintain our BUY rating on Dalmia Bharat with an unchanged TP of INR 2,205/sh (12x its Sep-26E consolidated EBITDA). During Q2FY25, while volume growth accelerated to 8% YoY, unit EBITDA slumped ~INR 250/300 per MT QoQ/YoY because of intense competition and monsoon-led weak pricing. Dalmia maintained its confidence in growing its volumes at 1.5x industry and expects pricing to rebound in H2FY25 as the current pricing environment is bad for all companies. Dalmia is also on track to lower its costs by ~INR 200/MT over the next three years as it is scaling up green power consumption, direct dispatches, and targeting lead distance reduction and ramp-up in captive coal mining. Dalmia also inducted a marketing head recently, thus filling an important gap in its leadership team. The fuel cost outlook remains soft, aiding the industry amid weak pricing.
Multi Commodity Exchange: MCX reported a strong quarter led by a surge in options volumes and expansion in margins. The revenue growth of 22% QoQ was led by a 39%/3% QoQ increase in options/futures revenue. The options notional ADTV jumped 32% QoQ, but the premium ADTV was up 38% QoQ due to a rise in the premium to notional (P/N) ratio (+7 bps QoQ to 1.7%), driven by a rise in volatility. We remain positive on the MCX growth story, led by (1) the launch of new contracts, (2) a surge in options active traders +65% YoY, (3) traction in options volume, and (4) higher P/N% for crude contracts. The new product pipeline consisting of monthly series contracts, index options, and monthly expiry gold options (launched) will trigger the next phase of volume growth. The regulatory clampdown (increase in lot sizes, higher STT) in equity derivatives makes commodity derivatives more attractive, and the gap between equities and commodities is narrowing gradually. MCX made a voluntary SGF contribution of INR 172mn (~6% of total revenue) as a safety measure, and we expect the SGF contribution to continue. The EBITDA margin expanded 636 bps QoQ to 68.8%, led by growth. The AMC cost for the CDP will hit in Q3, but the overall cost structure remains fixed. We increase our EPS estimates by ~3%/1% for FY26/27E and maintain our BUY rating with a target price of INR 7,100, based on a 40x Dec-26E core PAT + net cash ex SGF
City Union Bank (NS:CTBK): City Union Bank’s (CUBK) earnings were in line with our estimates due to a sustained uptick in loan growth and strong traction in fee income, partially offset by higher provisioning as the management looks to shore up its PCR. Deposit growth (+4.5% QoQ) was healthy with a steady CASA ratio of 29.4%. Given management’s strategy to continue medium-term investments in Tech and distribution, opex ratios are expected to stay elevated. While the loan book is on an improving trend, CUBK needs to achieve and sustain better-than-industry growth in the long term to regain its place of pride among the regional private banks. Having invested heavily in transformation, we expect CUBK to demonstrate productivity gains over the next few quarters, which should help sustain and improve its growth momentum further. We revise our FY25/FY26E earnings estimates by ~2% each to factor in marginally higher loan growth and maintain BUY with a revised RI-based TP of INR195 (1.4x Sep-26 ABVPS).
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