Ambuja Cement Among Top Picks For Morgan Stanley And Motilal Oswal — Here's Why

Morgan Stanley And Motilal Oswal Financial Services Ltd. have expressed a positive outlook on the cement sector, particularly highlighting Ambuja Cements Ltd. and UltraTech Cement Ltd. as top picks. Both companies are expected to benefit from improving domestic demand and a favourable cost environment in 2025.

Morgan Stanley and Motilal Oswal have outlined their perspectives on the sector, citing factors such as government capex, rural demand, and pricing dynamics, which could lead to margin expansion and outperformance in the coming months.

Morgan Stanley remains optimistic about the cement sector, forecasting a rebound in demand driven by a combination of factors, such as pent-up demand from the non-trade segment with a pickup in government capex. The brokerage also expects improved rural demand, on the back of a busy monsoon season, and pickup in retail demand, with the festive season now over.

The accelerated demand growth should support cement price hikes over the next few months, which is expected to drive strong margin expansion, according to Morgan Stanely.

Morgan Stanley is particularly bullish on UltraTech Cement and Ambuja Cements, as both companies are well-positioned to benefit from strong pan-India franchises and cost-improving capabilities. Despite concerns about subdued cement pricing, the brokerage expects these companies to outperform their domestic peers in 2025, benefiting from cost improvements and operating leverage.

Motilal Oswal is positive on the cement sector, with expectations of strong volume growth and improved realisations in the second half of financial year 2025.

The brokerage projects volume growth of approximately 8% year-on-year in second half of financial year 2025, with a 1% improvement in realisations sequentially, although down 5% YoY. Ebitda per tonne is forecasted to increase by 23% sequentially, driven by better realisations, operating leverage, favourable fuel prices, and cost-efficiency measures.

Motilal Oswal anticipates that clinker utilisation will improve in the second half of financial year 2025, which historically has supported pricing power in the cement industry. The improvement in clinker utilisation, combined with sustained price hikes, could lead to positive earnings surprises for financial year 2026 and financial year 2027 estimates.

The brokerage is particularly positive on companies with a strong presence in the North, Central, and West regions, as these areas are less susceptible to demand-supply imbalances and pricing volatility. UltraTech Cement is identified as the top pick, with Ambuja Cements and JK Cement also seen as strong contenders in the sector.

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