Morgan Stanley cautious on cement, expects sharp decline in companies’ earnings

MUMBAI: Morgan Stanley has turned cautious on the cement sector as it believes the demand disruption in the sector could be greater than supply-side challenges due to Covid-19. The brokerage expects a sharp decline in cement sector companies' earnings in the ongoing financial year.

The brokerage has downgraded UltraTech Cement to hold as it sees limited competitive advantage for the stock on volume growth front in a weak demand environment, and believes its deleveraging will likely be pushed to FY22. The brokerage has maintained overweight on Shree Cement, and is underweight on ACC and Dalmia Bharat.

Morgan Stanley has upgraded Ambuja Cements to overweight from equal weight and raised target price to Rs 200 from Rs 186 as the company stands out in the tough macro environment, it said.


The firm said Ambuja’s stock underperformed peers in the last seven years by roughly 90% due to limited growth visibility and margins. But this is likely to reverse due to improved growth and margin gap closing with peers.