JPMorgan has issued a bullish outlook on the Indian cement sector, with stocks like UltraTech Cement Ltd., Shree Cement Ltd., and Dalmia Bharat Ltd. rising 10-13% since mid-November. This uptick has occurred despite limited evidence of an immediate recovery. “This likely reflects rising expectations of an acceleration in central gov’t capex into financial year 2025 end. There is little evidence of spending improvement yet but this should happen soon”, the note said.
With expectations building for a surge in central government capex in the coming months, JPMorgan analysts are maintaining a positive outlook on key cement stocks.
In terms of future prospects, UltraTech Cement remains a preferred pick for its growth potential, especially as the company is set to commission an additional 9 million tonnes of cement capacity in the coming quarters. For now, the brokerage maintains an “Overweight” rating on UltraTech, while also noting that ACC’s valuation makes it another attractive option for investors.
The government has budgeted a substantial Rs. 11.1 trillion for capex in financial year 2025, a significant increase from last year’s Rs. 9.3 trillion. However, spending has been slow, with just Rs. 4.6 trillion utilised by October 2024, leaving the government with a tough task of increasing spending by 61% in the final months of the fiscal year, the brokerage noted.
Although private construction activity, particularly in real estate, is expected to pick up post-monsoon, cement demand has yet to see a marked acceleration. Despite sporadic price increases in certain regions, overall cement prices have shown little movement, with high pollution levels in the North limiting construction activity.
JPMorgan notes that while cement dealers have not seen significant price hikes, the expectation of price recovery remains a key driver for stock performance. With the third quarter nearly completed, cement companies are anticipated to see higher volumes, which should result in operating leverage. However, the firm also cautioned that the sector may struggle to meet full-year consensus expectations.
. Read more on Markets by NDTV Profit.With expectations building for a surge in central government capex in the coming months, JPMorgan analysts are maintaining a positive outlook on key cement stocks. Read MoreMarkets, Business
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