Global broking firm JP Morgan initiated coverage on the domestic cement sector, as the segment looks set for consolidation, with larger players turning aggressive.
According to the brokerage, the urbanisation and infrastructure projects should also boost medium-term demand for the companies. Capacity utilisation shall remain stable, despite the further capacity expansion.
Overall, the cement industry should see some recovery from the recent weakness seen in the sector, as government capex grew around 40 percent on-year following the monsoon. Additionally, companies cutting their costs shall bode well for the industry.
JP Morgan has initiated coverage on several cement companies, issuing an "overweight" rating for UltraTech Cement and ACC with target prices of Rs 13,750 and Rs 3,020 per share, respectively.
The broking firm issued a "neutral" call to Ambuja Cements and Shree Cements, setting targets at Rs 590 and Rs 25,175 per share.
Meanwhile, Dalmia Bharat received an "underweight" call, with a target price of Rs 1,550 per share, as the brokerage noted concerns over Dalmia Bharat's ability to raise utilisation.
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Cement companies have been plagued with woes over the recent quarter. The delayed infrastructure activities following the general election, unavailability of sand, above-average monsoon rains, and flooding in various regions across the country adversely impacted cement sales. Scorching heat, labour shortages in some regions further dented demand during Q2FY25.
Pricing remained under pressure across regions. While multiple attempts were made by cement manufacturers to hike prices during the quarter, monsoon, floods, and lack of infrastructure activities led to hikes being rolled back, keeping cement realizations under pressure.
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