India ranks as the world’s second-largest cement producer and contributes over 7% to the global installed capacity. According to the latest report, from FY12 to FY23, India experienced a remarkable 61% growth in its cement capacity, reaching 570 million metric tons from 353 million in FY22.
Projections indicate that the Indian cement sector is poised to witness a compound annual growth rate (CAGR) of 4-5% by the conclusion of FY27.
Morgan Stanley, a brokerage firm, notes that the cement sector may experience a period of stability in the near term due to a lack of major positive drivers. However, they anticipate strong demand driven by improving profit margins.
They predict that stocks of companies poised to increase their production capacity and reduce costs will perform well.Regarding specific companies, Morgan Stanley is optimistic about Ambuja Cements and UltraTech Cement.
They expect both companies to benefit from significant capacity expansions and increased sales volumes in the coming years. As per the CNBC TV 18 report.
Morgan Stanley expects both companies to increase their profit margins despite low cement prices, They predict that as margins grow, the companies could see higher stock valuations, possibly reaching peak levels during economic cycles.
Looking ahead to FY26, Morgan Stanley sees few risks to cement the company’s earnings. They anticipate margin growth primarily from cost savings, supplemented by modest price increases. In this context, companies with nationwide operations and strong cost-saving abilities appear to be in a relatively favorable position.
UltraTech Cement Ltd
On Monday, UltraTech Cement Ltd. shares were quoted at ₹11,856 per share, an increase of 2.19% on the National Stock Exchange. The company has a market capitalization of ₹ 3,42,073 crores.
The stock has gained a return of 19 percent in the last six months and 43 percent in the last 12 months.
A global research and broking firm, Morgan Stanley has given an Overweight call on the stocks with a target price of ₹13,620 per share, with an upside of 15% from the current price.
UltraTech has a consolidated capacity of 138.39 Million Tonnes Per Annum (MTPA) of grey cement. UltraTech has 23 integrated manufacturing units, 28 grinding units, one clinkerisation unit, and 8 Bulk Packaging Terminals.
UltraTech Cement Ltd’s operational revenue has increased by 12 percent yearly, from ₹63,240 crore in FY22-23 to ₹70,908 crore in FY23-24. During the same period, net profit rose by 38 percent, from ₹5,073 crore to ₹7,004 crore.
ACC Ltd
As of July 2024, ACC Limited produces 36.05 million tonnes of cement per year across its 16 cement plants in India. It is a part of the Adani Group.
The stock has gained a return of 17 percent in the last six months and 50 percent in the last 12 months.
Morgan Stanley has maintained equal weight on the stock with a target price of ₹2,930 per share, with an upside of around 8% from the current price.
ACC Ltd’s operational revenue has declined by 10 percent yearly, from ₹22,210 crore in FY22-23 to ₹19,959 crore in FY23-24. During the same period, net profit rose by 164 percent, from ₹885 crore to ₹2,337 crore. On Monday, ACC Ltd shares were quoted at ₹2,722 per share, an increase of 1.33% on the National Stock Exchange.
Ambuja Cements Ltd
Ambuja Cements Ltd. is among the leading cement companies in India. It is a part of the Adani Group. Currently, Ambuja Cement has a cement capacity of 31 million tonnes with six integrated cement manufacturing plants and eight cement grinding units across the country.
The stock has gained a return of 30 percent in the last six months and 65 percent in the last 12 months.
A global research and broking firm, Morgan Stanley has given an Overweight call on the stocks with a target price of ₹775 per share, with an upside of 13% from the current price.
Ambuja Cements Ltd’s operational revenue has declined by 15 percent yearly, from ₹38,937 crore in FY22-23 to ₹33,160 crore in FY23-24. During the same period, net profit rose by 56 percent, from ₹3,024 crore to ₹4,738 crore.
On Monday, Ambuja Cements Ltd. shares were quoted at ₹689 per share, an increase of 1.80% on the National Stock Exchange.
Written by Omkar Chitnis
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