Morgan Stanley has turned more constructive on India's building products sector, upgrading both Astral Ltd. and Kajaria Ceramics, while naming Astral its preferred pick on expectations that the company is better positioned to capitalise on structural growth opportunities.
The brokerage upgraded Astral to 'Overweight' from 'Equal-weight' and raised its target price to Rs 1,660 from Rs 1,378. It also upgraded Kajaria Ceramics to 'Equal-weight' from 'Underweight', increasing its target price to Rs 1,410 from Rs 912.
"We believe India's building products industry remains structurally attractive, supported by favorable demographics, urbanisation, a structural housing cycle and sustained infrastructure investment," analysts Rahul Gupta and Ruchika A. Dhanuka wrote in a note dated July 13, 2026. They added that while both companies are among the strongest franchises in the sector, "we prefer Astral over Kajaria."
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The brokerage said Astral's exposure to faster-growing categories such as pipes and plumbing, adhesives, and construction chemicals gives it an edge. These segments benefit from stronger demand drivers, lower penetration levels and increasing product intensity, providing a longer runway for growth than tiles.
Morgan Stanley expects market-share gains, scaling of newer businesses, CPVC backward integration and operating leverage to drive superior earnings growth and improving returns for Astral over the medium term. It also said the proposed Chemicals demerger offers additional value-unlocking optionality.
By comparison, the brokerage described Kajaria as "the highest-quality franchise in Indian tiles," backed by market leadership, distribution strength and brand equity. However, it noted that earnings growth in the tiles business remains more dependent on housing demand and market-share gains than several of Astral's categories.
The brokerage said demand across the building products industry continues to be anchored by residential real estate, renovation activity and government spending on water infrastructure, sanitation and affordable housing.
Morgan Stanley identified stronger housing demand, higher public infrastructure spending, and faster premiumisation and formalisation across building products as key upside risks. On the downside, it flagged weaker housing demand, lower infrastructure spending and a sharp rise in commodity input costs as the principal risks to its outlook.
On the bourses, Astral shares rose as much as 3.49% to hit an intraday high of Rs 1,377.55 per share, while Kajaria Ceramics surged 2.84% to an intraday high of Rs 1,270 per share.
Around 11 am, Astral shares were trading 2.85% higher at Rs 1,368.90, while Kajaria Ceramics was up marginally (0.17%) at Rs 1,236.95. In comparison, BSE Sensex was trading 0.40% lower at 77,303.
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