The cement sector has been struggling with low demand, falling prices, and poor volume growth recently. However, brokerage firm UBS expects demand to bounce back in the next fiscal year, leading to a strong recovery.
Positive Outlook
The housing upcycle will increase demand for cement and a revival in government capex will also boost infrastructure projects, further supporting cement consumption. Another key driver is industry consolidation, where the existing market leaders have an advantage.
Cost efficiencies will also improve due to a shift to renewable energy, greater use of waste heat recovery systems, lower freight costs from increased rail transport, and improved logistics from mergers.
With the sector trading slightly above its five-year average on a one-year forward EV/EBITDA basis, leading companies are well-positioned to benefit despite recent price movements.
Market Share
The top two cement manufacturers are projected to increase their market share from 33 percent in FY24 to 44 percent by FY30, while the top four players will see a combined rise from 48 percent to 61 percent.
Ultratech Cement
UltraTech Cement Limited, a subsidiary of the Aditya Birla Group is India’s largest and one of the world’s leading cement manufacturers. UBS has increased the company’s target price to Rs 13,000 from previous Rs 9,000, This indicates an upside potential of about 14 percent.
With a market capitalization of Rs 3 lakh crore, the shares rose 4 percent to Rs 11,472.05 apiece compared to the previous closing price.
Ambuja Cement Ltd
Ambuja Cements, a member of the Adani group, is one of the leading cement companies in the country. UBS has increased the company’s target price to Rs 620 from previous Rs 475, indicating an upside potential of over 19 percent.
With a market capitalization of Rs 1.3 lakh crore, the shares rose 4 percent to Rs 538.5 apiece compared to the previous closing price.
Dalmia Bharat Ltd
Dalmia Bharat,started in 1939 is the 4th largest cement manufacturer by installed capacity in India. UBS has upgraded the company with a target price of Rs 2,100 per share. This indicates an upside potential of over 20 percent.
With a market capitalization of Rs 32,971.14 crore, the shares rose 2 percent to Rs 1,786.95 apiece compared to the previous closing price.
ACC Ltd
ACC Ltd, a member of the Adani Group, is primarily engaged in the business of manufacturing and selling ready mix concrete and cement. UBS has maintained buy with a target price of Rs 2,250. This indicates an upside potential of 17 percent.
With a market capitalization of Rs 36,557.49 crore, the shares rose 2 percent to Rs 1,967.50 apiece compared to the previous closing price.
Written by Shwetha Sairam
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