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Informist, Friday, Feb. 28, 2025

MUMBAI - Shares of domestic cement companies are likely to take cues from the overall market next week, which is expected to fall more due to worries about US trade policies. Expectations of price hikes, capacity expansion through mergers or acquisitions, volume growth, and likely higher capital spending by the government are expected to give the sector a boost in the medium term, analysts said. However, there are worries that cement companies are struggling to sustain price hikes due to higher supply and competitive pricing. They had increased prices in December and January, but are yet to absorb the benefits, an analyst at a domestic broking firm said.

Shares of most cement companies fell for the third consecutive week due to the sell-off in the stock market due to fears of a trade war between the US and China, worries about slowdown in the US economy, uncertainty about further trade policies under US President Donald Trump, expensive domestic valuation, and disappointing corporate earnings growth.

Analysts have been betting on the government's capital expenditure to gain traction in the second half of the current financial year, which could boost construction-related sectors, including cement. According to data released by the Controller General of Accounts, the government's Apr-Jan capital expenditure grew 5% on year to INR 7.57 billion, after seeing a slowdown in the first half of FY25.

Among specific stocks, large-cap player UltraTech Cement announced its plan to foray into wires and cables business, with a capital expenditure of INR 18 billion over the next two years. While this was called a 'positive surprise' by some broking firms, including JP Morgan, some analysts said the company's overall market share in this vertical would be at or less than 6% and that the cement giant might incur much higher cost as a new entrant in this business. The company's recent acquisition of Kesoram Industries' cement business is expected to strengthen the company's volume growth and operating profits.

Nuvama Institutional Equities said that in the wires and cables industry, the distribution channel has to be largely built afresh for wires businesses. Also, cables operations need approvals from several customers across different user industry that may take 6-24 months, depending on the stock keeping units and post-commissioning of plants, it said in its report.

Nomura Global Markets has a 'buy' rating on the stock with a target price of INR 12,800, which is 26% higher than its closing price of INR 10,128.45 Friday on the National Stock Exchange. "We maintain our positive stance on UltraTech and believe it is well-placed among peers, largely driven by potential above-industry volume growth and sustainable cost-saving measures over FY26-FY27," it said in its report Thursday.

TOP HEADLINES
* ANALYSIS: Cement cos beat Street view on sales growth, PAT aided by one-offs
* UltraTech sets Sat as effective date to buy Kesoram Ind cement business
* UltraTech to expand into wires, cables segment; capex INR 18 bln over 2 yrs

Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Anjana Therese Antony
Edited by Ashish Shirke

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