JPMorgan has provided its outlook on India’s cement sector, initiating ratings on key players and expressing a view that the industry is poised for consolidation, with larger companies becoming more aggressive. The sector is expected to benefit from increasing urbanization and infrastructure projects, boosting medium-term demand. Here are the key takeaways from JPMorgan’s report:
Company Ratings:
- UltraTech Cement: Initiated with an Overweight rating and a target price of Rs 13,750. JPMorgan sees UltraTech as well-positioned to capitalize on growing demand in the sector.
- Ambuja Cement: Initiated with a Neutral rating and a target price of Rs 590. While Ambuja has strong fundamentals, the outlook remains cautious due to near-term challenges.
- ACC: Initiated with an Overweight rating and a target price of Rs 3020. ACC is expected to see stronger growth as it leverages its capabilities in a consolidating market.
- Shree Cement: Initiated with a Neutral rating and a target price of Rs 27,125. While Shree Cement remains a key player, JPMorgan sees limited upside in the short term.
- Dalmia Bharat: Initiated with an Underweight rating and a target price of Rs 1,550. JPMorgan raised concerns over Dalmia Bharat’s ability to raise capacity utilization in the current market environment.
Sector Outlook:
JPMorgan expects the Indian cement sector to recover from recent weakness, with government capital expenditure growing by 40% year-on-year, particularly in infrastructure projects post-monsoon. The firm also believes that despite the addition of new capacity, utilization rates should remain stable, supporting growth in the medium term.
Urbanization and infrastructure developments will be key drivers for cement demand, helping companies withstand short-term challenges such as rising costs and fluctuating demand. However, smaller players like Dalmia Bharat may struggle to raise utilization, posing risks to their growth.
JPMorgan sees larger cement companies benefiting from the sector’s consolidation as they aggressively expand their capacities and take advantage of the growing demand.
Disclaimer: This article is for informational purposes only and should not be construed as financial advice. Please consult a financial advisor before making any investment decisions.
