Cement - Stronger Together; Motilal Oswal's Thematic View

Motilal Oswal Report

We believe that acceleration in consolidation and higher clinker utilisation can improve the industry’s pricing power in the long run. We estimate that large players will benefit the most from the larger scale of operations, brand equity, and cost-saving measures. This, in our view, will help these players maintain/improve their premium valuations.

We have ascribed higher-than-historical valuation multiples and assigned premium over other companies to UltraTech Cement Ltd. and Ambuja Cement Ltd., as we believe that these companies would benefit from inorganic opportunities, as seen in last few deals in the sector.

Higher capacity additions will also help to improve cost structures, e.g., operating efficiencies, reduction in lead distance, etc. In the Q1 FY25 preview, we rolled over the valuation multiples for our coverage companies to June-26E from March-26E.

We value UltraTech Cement and Ambuja Cement at 20 times Jun'26E enterprise value/Ebitda.

Our target multiple of 12 times Jun'26E EV/Ebitda for ACC is in line with Dalmia Bharat Ltd. and The Ramco Cements Ltd.

We reiterate our Buy rating on UltraTech Cement, Dalmia Bharat, JK Cement, BirlaCoep and JK Lakshmi Cement and maintain our Neutral rating on Ramco Cements and Shree Cements.

We upgrade Ambuja Cement to Buy from Neutral given its value-accretive acquisitions in last one year, which will help Ambuja Cement balance its market presence and ambitious organic expansion plans. We value Ambuja Cement at 20.0 times Jun’26E EV/Ebitda to arrive at our target price of Rs 800.

We also upgrade ACC to Buy from Neutral given its attractive valuation and expected improvement in profitability, driven by cost-saving initiatives, strong brand positioning, and structural changes in the operations (higher volume under master supply agreement and leveraging group synergies). We value ACC at 12.0 times Jun’26E EV/Ebitda to arrive at our target price of Rs 3,300.

Click on the attachment to read the full report:

DISCLAIMER

This report is authored by an external party. NDTV Profit does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of NDTV Profit.

Users have no license to copy, modify, or distribute the content without permission of the Original Owner.