Macquarie has shared its latest analysis of the cement sector, emphasizing an expected demand recovery and pricing improvements from the second half of CY24, which should drive margin expansion. The brokerage remains optimistic about medium-term earnings for leading cement companies, supported by industry capacity consolidation and cost optimization strategies.
Key Highlights:
- Demand Recovery and Pricing:
- Macquarie expects a demand rebound and potential price hikes to boost margins significantly from the lows of H2CY24.
- Capacity Utilization:
- Industry capacity utilization is projected to remain steady, aligning with demand recovery trends.
- Cost Optimization:
- Focus on cost efficiency and capacity consolidation is expected to contribute positively to medium-term earnings.
- EBITDA Outlook:
- The brokerage has reduced FY26 EBITDA estimates by 5-14% across major cement companies, reflecting cautious optimism amidst pricing pressures.
Stock Recommendations:
- UltraTech Cement:
- Rating: Maintain Outperform from Neutral.
- Target Price (TP): ₹11,868.
- Continues to be Macquarie’s top pick in the sector.
- Ambuja Cement:
- Rating: Maintain Outperform from Neutral.
- TP: ₹618.
- ACC Cement:
- Rating: Maintain Outperform from Neutral.
- TP: ₹2,425.
- Ramco Cement:
- Rating: Maintain Underperform from Neutral.
- TP: ₹785.
Conclusion:
Macquarie’s outlook for the cement industry remains moderately positive, underpinned by demand recovery, steady capacity utilization, and pricing improvements. While FY26 EBITDA estimates have been trimmed, the brokerage remains optimistic about UltraTech Cement’s leadership and execution capabilities in the sector. Investors are advised to watch out for pricing and demand trends as key drivers of sector performance.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Please consult a financial advisor before making investment decisions.
