The cement sector’s challenges might ease as demand recovers, prices decline, costs stabilise and business consolidation progresses, in accordance with as brokerage agency UBS. This optimism comes as costs have bottomed out, declining 8%.
Ambuja Cements Ltd. stays the analysis agency prime choose. UBS upgraded to “purchase,” with the goal raised to Rs 620. It additionally upgraded UltraTech Cement Ltd. to “purchase” from “impartial,” setting a worth goal of Rs 13,000, citing sturdy execution regardless of difficult circumstances.
“Our fears over oversupply attributable to Ambuja’s aggressive natural enlargement have receded too, as Ambuja relied closely on mergers and acquisitions, aiding sector consolidation,” the observe mentioned.
UBS additionally upgraded Dalmia Bharat Ltd. to “purchase” from “promote,” with a worth goal of Rs 2,100. It maintained a “purchase” ranking on ACC Ltd., citing supportive valuations and business traits, with a goal worth of Rs 2,250.
The analysis agency expects structural components to scale back prices within the sector, together with a shift to renewable power, waste warmth restoration methods, decrease freight prices attributable to rising rail use, mergers decreasing lead time, and improved logistics.
UBS initiatives that the highest two cement makers will broaden their market share from 33% within the monetary 12 months ending March 2024 to 44% within the monetary 12 months ending March 2030, whereas the highest 4 companies will enhance their share from 48% to 61%.
UBS, which beforehand had a detrimental outlook on the sector attributable to an election-year demand slowdown and worth hikes, mentioned these dangers have now performed out. It expects a sector restoration regardless of potential dangers from a shift in authorities coverage in the direction of populist spending and a potential slowdown in the true property cycle.
