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Informist, Friday, Mar. 28, 2025

MUMBAI - Stocks of major cement companies are expected to rise in the near term as no price cuts in the sector are expected, analysts said. Except for the eastern parts of India, other regions failed to absorb the cement price hikes taken in March due to the year-end push for volumes, analysts said. Only the southern region saw a price decline of INR 3-7 per 50 kg bag, they said. The outlook on the demand scenario also remains positive, with analysts hopeful of a further pick-up in government's capital expenditure for 2025-26 (Apr-Mar), they said.

While the overall demand trend is healthy, limited labour availability post Holi in select markets and liquidity constraints due to delayed payments for government projects have posed challenges, Elara Securities said in a report Tuesday. Market intermediaries expect cement firms to announce price hikes in April, with south India likely to make the sharpest hike announcement, the brokerage said.

"We expect the cement industry to report a further sequential recovery in the March quarter...the recovery in the March quarter is likely to be driven by higher volume, better cement prices, and operating leverage benefit," the brokerage said. However, the recent uptick in petcoke prices along with likely revision on royalty for limestone would result in margin peaking in the March quarter in the absence of any price hike, Elara Securities said.

On Tuesday, media reports, citing UBS, said the broking firm has turned bullish on the sector as it expects an earnings upcycle to emerge in FY26. The brokerage upgraded its rating on Ultratech Cement, Ambuja Cements, and Dalmia Bharat and maintained a 'buy' on ACC. The brokerage noted that demand revival driven by an uptick in housing infrastructure and government's capital expenditure, structural cost savings, and sectoral consolidation led by Ultratech Cement and Ambuja Cement are positive factors for the sector, reports said.

The extent to which the price hike taken in March is absorbed remains to be determined, Jyoti Gupta, a senior research analyst who tracks the cement sector at Nirmal Bang Equities, said. "We expect the industry to meet its volume expectations in the March quarter and end the quarter with a net rise of INR 3-4 per bag, resulting in an INR 60-80 per tonne gain in realisation," she said. Going forward, we expect that consolidation will offer pricing stability to the industry, as the top five competitors would control more than 58% of the market, Gupta said. We anticipate steady and consistent price growth in the range of 1-1.5% over the next three years, she said.

On consolidation, Crisil Ratings said in a report released Monday that it may also reduce competitive intensity, enhance pricing power, and improve players' ability to manoeuvre commodity cycles, which could improve margins. The benefits of wider geographical reach, access to crucial limestone reserves, and economies of scale more than offset a marginal increase in the financial leverage of the acquirers and support an improvement in their credit profiles over the medium term, Crisil said.

TOP HEADLINES

* Ambuja Cements board OKs re-appointing Ajay Kapur as MD for 2 yrs from Tue 

* Ambuja Cements board OKs appointing Rakesh Tiwary as CFO from Apr 1 

* Ambuja Cements board OKs appointing Vinod Bahety as CEO for 3 yrs from Tue 

* UltraTech commissions 3 expansion projects, ups India capacity to 183 mtpa

* Shree Cement's Nawalgarh unit clinker output capacity rises to 4.5 mln tn/yr

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 Noopur Bhandiwad
Edited by Tanima Banerjee

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