Axis Securities recently revealed its top three cement stock picks with a potential growth of up to 29 percent. The brokerage recommended ‘Buy’ ratings for UltraTech Cement Ltd, JK Cements Ltd, and Ambuja Cements Ltd, citing reasons such as higher price realizations and an uptick in demand.
UltraTech Cement Ltd, a market leader with a current market share of 25 percent, is set to further solidify its position with an expected increase to 28 percent. The company’s capacity expansion plan is on track, projected to result in an 11 percent compound annual growth rate (CAGR) in volume over the period from FY24 to FY27. Axis Securities anticipates a cost reduction of Rs 200-300 per tonne within the next 2-3 years, leading to an estimated EBITDA margin of 22 percent in FY27. The brokerage has set a target price of Rs 13,510 based on the third-quarter results, representing a potential upside of 17.56 percent from the current closing price of Rs 11,491.60.
Moving on to JK Cements Ltd, Axis highlighted the company’s robust operating performance driven by higher realizations and positive operating leverage, resulting in a significant quarter-on-quarter improvement in EBITDA per tonne. With a projected growth in volume, revenue, EBITDA, and APAT at a compound annual growth rate of 12 percent, 10 percent, 25 percent, and 36 percent respectively over the period from FY24 to FY27, the brokerage foresees a potential increase of 12.10 percent in JK Cements shares to reach a target of Rs 5,380.
Lastly, Axis Securities expressed optimism in Ambuja Cements Ltd, an Adani Group-led company, setting a target price of Rs 655, indicating a potential upside of 29.31 percent from the previous day’s closing level. The brokerage emphasized strategic business initiatives aimed at reducing operating costs, improving EBITDA margins, and capitalizing on strong infrastructure demand. With expectations of an improvement in EBITDA margins to 18-19 percent in FY26, Ambuja Cements Ltd is poised to benefit from robust growth driven by infrastructure development, housing, and commercial sectors.
Looking at the broader outlook for the cement sector, Axis Securities remains positive on long-term demand drivers, forecasting a compound annual growth rate of 7-8 percent in cement demand from FY24 to FY27. The brokerage believes that sector consolidation will benefit large players through economies of scale, supply chain efficiency, and improved pricing dynamics in the long run. Despite ongoing capacity additions, the long-term view is that cement demand will outpace supply.
As you consider potential investment opportunities in the cement sector, it is essential to consult with a qualified financial advisor to make informed decisions. The information provided by Axis Securities is for informational purposes only and should not be construed as specific investment advice. Stay informed, stay cautious, and make investment decisions wisely to navigate the dynamic landscape of the stock market.
