Cement players Grasim Industries Ltd and UltraTech Cement Ltd rallied sharply in trade on Tuesday, June 10, after international brokerage Morgan Stanley reiterated its bullishness on the two firms.
Morgan Stanley has an over-weight rating on Grasim Industries shares, with a target price of Rs 3,500 per share. There are multiple opportunities playing out that could support the stock’s medium-term upside.
The brokerage added that further value is being unlocked in the paints business, while new-age ventures are scaling up quickly. With holding company discounts continuing to moderate, Morgan Stanley named Grasim Industries among its top picks.
At 11.30 am, UltraTech Cement shares were trading at Rs 11,423 per share, higher by 1.5 percent, while Grasim Industries stock was quoting Rs 2,711, up 3.9 percent on the NSE.
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Morgan Stanley also upgraded its price target on UltraTech Cement from Rs 13,650 per share, to Rs 14,000 each. The brokerage believes the company will be a strong earnings compounder over the coming years, backed by strong volume growth potential and multiple revenue levers., while also highlighting the ongoing cost optimisation efforts and notes that the stock’s premium valuations are justified.
UltraTech Cement is Morgan Stanley’s preferred pick in the cement sector. The firm has steadily gained volume market share in recent years, supported by its nationwide footprint, growing network of in-house retail outlets, and strong brand appeal, despite its already significant scale.
According to Morgan Stanley, the company’s volumes are projected to grow at a 10 percent CAGR over the next three years, outpacing the broader industry’s estimated CAGR of 7.5 percent.
The brokerage attributed this outperformance to UltraTech Cement’s ability to drive volume growth across regions by leveraging local pricing trends, increasing the share of premium products and direct sales, and expanding its retail footprint. This, it noted, gives UltraTech an edge in maintaining a better pricing trajectory than the broader industry.
With pricing expected to remain largely flat over the near term, Morgan Stanley believes UltraTech’s strategy is particularly important as the sector prioritises absorbing existing capacity over chasing aggressive volume growth.
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