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Cement stocks saw a strong rally on December 2, led by Ultratech Cement, which surged over 3%; Here’s what investors should know
Cement shares in demand today; Here’s why
Cement stocks saw a strong rally on December 2, led by Ultratech Cement, which surged over 3% to top the Nifty 50 gainers list. The rally was driven by optimism from Jefferies, which expressed confidence in a recovery for Indian cement companies in the second half of the fiscal year. Other cement stocks, including Shree Cement, India Cements, JK Lakshmi Cement, JK Cement, Andhra Cements, and ACC, also saw gains of 2-3%.
Jefferies highlighted Ultratech Cement as its top pick among large-cap stocks and JK Cement as its favorite mid-cap stock, citing bottoming-out prices and improving demand conditions as key drivers for growth.
“Demand growth has moderately improved in October-November, and recovery should continue into Q4 with a revival in government capex,” the firm stated, forecasting 8-10% volume growth in H2FY25, compared to flat performance in H1FY25.
Regionally, Northern India outperformed in November, with prices firming up due to restricted supply in Delhi following construction bans. However, Central India, including Lucknow and Bhopal, faced pricing pressures across construction materials. The Southern region, in contrast, saw price declines due to sluggish demand and increased competition.
Ultratech Cement further gained traction after announcing plans to expand its Kukurdih unit’s production capacity from 2.7 MTPA to 3.3 MTPA through debottlenecking. The company stated that this capacity expansion was part of its ongoing program, and its total cement capacity now stands at 156.66 MTPA, including overseas capacity.
“As part of its ongoing capacity expansion programs, the company has identified an opportunity for debottlenecking at its integrated unit at Kukurdih, Chhattisgarh. The unit’s capacity has increased by 0.6 mtpa (million tonne per annum), i.e. from 2.7 mtpa to 3.3 mtpa,” UltraTech Cement said in a regulatory filing on Friday after market hours. Debottlenecking is a process that involves identifying and removing bottlenecks in a system to increase production capacity and efficiency.
UltraTech’s ambitious capacity expansion capitalises on the substantial long term growth potential of India’s cement sector. Its growth trajectory aligns closely with India’s broader growth story, the company said.
By increasing its scale, the company will meet the rising demand for cement nationwide. Increase in Government spending on Infrastructure sector and rising demand from the urban housing sector is expected to generate a sustainable volume growth of 7-8 per cent in future years, the company said.
Meanwhile, Prabhudas Lilladher echoed the positive sentiment, expecting improved cement demand in H2FY25, supported by government infrastructure spending, a strong monsoon boosting the rural economy, and steady urban housing demand. The brokerage also favored Ultratech Cement and ACC as its top picks in the sector.
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