Cement stocks rally up to 5%. What's behind the strength?

NEW DELHI: Shares of cement stocks on Wednesday rallied up to 5% after Japanese broking firm Nomura upgraded four of them and raised their target prices on strong sales volume growth in FY25.

Nomura has upgraded Ultratech to buy from neutral with a target price of Rs 11,500. Dalmia Bharat's target has been raised to Rs 2,900 and Ramco Cement to Rs 1,250.

It maintained a buy rating on Shree Cement but increased the target price to Rs 33,400 from Rs 27,800 earlier.


Following the upgrades, Ultratech shares jumped 3.5% to hit a 52-week high of Rs 10,379.70 on BSE.

Dalmia Bharat stock rose 3% to Rs 2,301.70, while that of The Ramco Cements went up by 5% to Rs 1,037.45.

Shree Cement was also trading about 1% higher.


In the first half of FY24, India's cement industry has delivered a strong beat on the volume front with volume growth of 17% YoY.

In FY25, the brokerage expects cement demand to moderate as new infrastructure project launches typically slow down in the country in a general election year. "However, demand should remain higher than the past 10-year CAGR of 4%, largely due to the central government’s continued thrust on infrastructure, stable demand from rural and affordable housing, and a pickup in urban housing," Nomura said.

An analysis of the past four election cycles by the broking firm shows that trade prices generally remain flat in pre-election years. "However, the trade prices so far have declined 2% y-y largely on account of a higher base effect, given FY23 was a strong pricing year for the industry as the trade prices rose 5% YoY to offset input cost inflation," the analyst said, adding that he expects on an average Rs 200-250 per tonne unitary EBITDA improvement in Q3.

"Even if the fuel cost escalates from these levels, the full impact will come from 2QFY25F. For our coverage, based on strong volume momentum, better pricing discipline, and relatively lower cost, we expect an average Rs 150-200/t unitary EBITDA expansion in FY25F," Nomura said.

It has reduce ratings on both Adani-owned cement stocks - ACC and Ambuja Cements.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)