Shares To Buy: DRChoksey Suggests These Cement Stocks To Buy And Accumulate, Sees Upto 25% Upside

Deven Choksey Research Report

Cement prices continued to decline in Q2 FY25, extending the downtrend observed over the past few quarters. The sequential drop in prices can be attributed to several factors, including prolonged monsoons, ongoing sector consolidation, and the traditionally weak seasonality of the quarter. Despite cement prices remaining at multi-quarter lows, demand remained subdued, with flat YoY growth across our coverage universe.

This stagnation is largely due to delays in infrastructure sector fund allocations, the lingering impact of the general election, and the seasonal effects of the monsoon quarter, which typically dampen activity.

ACC Ltd.

We retain our target price of Rs 2,790 per share and our Buy' rating on the shares of ACC Ltd.

ACC is expanding capacity with two new units—Sindri (1.6 million tonnes per annum) by Q4 FY25E and Salai Banwa (2.4 mtpa) by Q1 FY26E— increasing total capacity from 38.6 mtpa to 42.6 mtpa by Q1 FY26E. ACC remains debt-free, with net cash of Rs 14,974 million, supporting its growth trajectory.

Adani Group’s acquisition of a 46.8% stake in Orient Cement and its earlier acquisition of Penna Cement (Q1 FY25) strengthens its footprint in southern India’s cement market. These moves are expected to deliver synergistic benefits for ACC, enhancing operational efficiencies and boosting profitability.

Margin improvement initiatives—expanded waste heat recovery system capacity, increased linkage/captive coal usage, and higher reliance on alternative fuels—are likely to support cost optimization.

We maintain our FY26E Ebitda of Rs 39,130 million and an EV/Ebitda multiple of 13.0x, reflecting our confidence in the ACC’s ability to capitalize on synergy benefits, cost savings, and the strategic acquisition by the parent company that will drive ACC’s volume and enhance profitability. Accordingly, we retain our target price of Rs 2,790 per share and our 'Buy' rating on the shares of ACC.

UltraTech Cement

We maintain our target price of Rs 12,063 and an 'Accumulate' rating on UltraTech Cement Ltd. shares.

As of H1 FY25, UltraTech Cement’s capacity reached 156.1 mtpa, including 1.2 mtpa commissioned in October 2024. The company plans to add 6.3 mtpa in H2 FY25E, followed by 11.8 mtpa in FY26E and 14.7 mtpa in FY27E, targeting 188.9 mtpa by FY27E.

Pending regulatory approvals for acquisitions of Kesoram Industries (10.75 mtpa) and India Cements (14.45 mtpa) could further elevate consolidated capacity to 214.1 mtpa, strengthening its market position.

UltraTech Cement is making significant strides in operational efficiency and sustainability. WHRS capacity has grown from 278 MW in FY24 to 308 MW, with a target of 450 MW by FY27E, while renewable energy capacity increased from 612 MW to 681 MW, aiming for 1.8 GW by FY27E.

Additionally, lead distance is projected to decline to ~360 km by FY27E, driving a reduction in operating costs by Rs 300/tonne, supported by savings from green power, alternative fuels, blended cement, logistics, and operational efficiencies.

We maintain an Ebitda of Rs 175,623 million for FY26E and apply an EV/Ebitda multiple of 20.5x, driven by robust expansion plans expected to stimulate volume growth. This, combined with cost-cutting initiatives focusing on an improved green power mix, increased use of Waste Heat Recovery Systems, and higher adoption of alternative fuel sources, is likely to support margin growth in the coming years.

Consequently, we maintain our target price of Rs12,063 and an 'Accumulate' rating on UltraTech Cement shares.

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