Strong Q4 Boosts Cement Sector; Axis Securities Backs Ultratech, JK Cement, Birla Corp With Bullish Targets

Declining cement prices, better operational performance due to steady power, fuel, and other raw material costs have boosted cement sector companies' profitability in the March quarter of the financial year 2024-25.

Performance of the cement sector companies was in line with expectations, with JK Cement, Birla Corporation, Shree Cement, Ambuja Cement, Star Cement, Dalmia Bharat Limited, emerging as notable outperformers in the sector, according to the Axis Securities report.

These companies delivered stronger margins during Q4FY25; however, ACC Lakshmi Cement and Heidelberg Cement presented mixed results during the quarter under review, noted the brokerage in its report on the cement sector Q4.

Performance across the coverage universe was largely in line with expectations. Notable outperformance came from JK Cement, Birla Corporation, Shree Cement, Ambuja Cement, and Star Cement. UltraTech Cement and Dalmia Bharat Limited delivered stronger margins, while ACC Limited, JK Lakshmi Cement, and Heidelberg Cement posted mixed results.

Top Cement Stocks To Pick Post Q4 Result

Axis Securities has recommended three cement sector stocks as part of its conviction picks for long-term growth. The brokerage has underlined that these cement sector stocks are likely to benefit from higher capex outlay, better housing, real estate and infrastructure demand, and a capacity expansion plan.

UltraTech Cement | Target Price: Rs 13,510

Axis Securities has recommended a 'Buy' call with a target price of Rs 13,510 per share on BSE for long term. "With expanded capacity and scale, the company is positioned to strengthen its market leadership, targeting a market share increase from 25% to 28%. We project volume growth at an 11% CAGR over FY24-27E," noted Axis Securities in its report.

JK Cement | Target price: Rs 5740

JK Cement's total grey cement capacity is likely to expand with its aim to add 6 MTPA as part of its capacity expansion program. The company scrip closed at a market price of Rs 5494.10 per share on BSE.
"We project the company will grow its volume, revenue, EBITDA, and APAT at a CAGR of 12%, 9%, 25%, and 36%, respectively, over FY24-FY27E," noted Axis Securities.

Birla Corporation | Target Price: Rs 1560

The company is entering into its next growth phase with a strong foothold in central India. Birla Corporation's shares closed Rs 1373.45 per on BSE on Friday.

"Strong infrastructure demand and ongoing needs from the housing and commercial sectors are anticipated to boost cement demand moving ahead. Strategic investments in roads, railways, and urban and commercial amenities are poised to drive robust growth. The company expects demand for the industry to grow in the range of 6-7% for the next few years," red Axis Securities report.

Cement Sector Outlook

The cement companies benefitted from the operational performance of the cement companies during the March quarter. As the power and fuel costs are expected to remain range-bound during the coming months, the industry is likely to expand in future.

Cement sector growth will be supported by "long-term demand drivers." Whereas, top players in the industry will enjoy growth due to "economies of scale, supply chain efficiency, and better pricing in the long term."

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