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Nirmal Bang Report
With Q4 result announcements just around the corner, Nirmal Bang has identified select cement stocks to Buy, Hold or Sell ahead of the March quarter.
According to Nirmal Bang the near-term outlook for the cement industry remains constructive on demand but cautious on margins, supported by strong volume growth, improving utilisation, and gradual price recovery, while downside risks persist from a potential shift in government spending from capex to subsidies, rising input costs, logistics volatility, and intermittent supply-side disruptions (including bags and diesel availability).
While pricing tailwinds may provide partial relief, cost inflation and operational bottlenecks are likely to keep margins under pressure in the near term. The key variables to monitor include:
- Resolution of polypropylene supply and cement bag shortages.
- Diesel availability and freight market stability.
- Trends in coal and petcoke prices.
- Sustainability of price hikes across regions.
In summary, Q4 FY26 reflects a demand-driven upcycle constrained by supply-chain inefficiencies and cost inflation with the industry navigating a delicate balance between growth and profitability.
ACC
Projection: Revenue, Ebitda, and PAT are expected to record FY25βFY27E CAGR of 11%, 11%, and 3%, respectively.
Investment commentary: The stock trades at 6.2x 1-year forward EV/Ebitda (FY27E), below its 5-year average of 13x. While Nirmal Bang maintains a Buy on the stock, it has reduced target multiple from 10.6x to 8x Mar-28E EV/Ebitda. The reductions pertain to the fuel and operational impact on the industry due to the increased fuel costs lingering on the economy. We achieve a revised target price of Rs 1,622 ( ~15% lower than our earlier target price of Rs 1,963).
Ambuja Cements
Projection: Nirmal Bang project revenue, Ebitda, and PAT CAGR of 25%, 34%, and 17%, respectively, over FY25βFY27E.
Investment commentary: The stock currently trades at 9.6x FY27E EV/Ebitda, which is below its 5-year historical average of 11.8x. While the brokerage maintains a βBuy' rating on Ambuja Cements, it reduces the target multiple ~8% valuing it at 11x (earlier 12x) Mar-28E EV/Ebitda reflecting a moderation in FY27 estimates and a more conservative multiple amid a volatile fuel cost outlook, arriving at a target price of Rs 558 (earlier TP: Rs 702).
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