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HDFC Securities Institutional Equities
In this report the brokerage recommends 15 cement stock under its coverage either to Buy, Add, Sell, Reduce.
Sector outlook and estimate revisions:
The brokerage highlights that cement demand outlook remains resilient, but pricing power continues to underwhelm despite sector consolidation.
Energy and packaging costs are expected to rise by ~Rs 200– 300/MT and ~Rs 100/MT respectively from mid-Q1 FY27, exacerbated by geopolitical tensions in the GCC region.
If sustained, FY27–28 opex could increase by Rs 300-400/MT, necessitating cement price hikes of Rs 25– 30/bag YoY.
Recent price hikes of Rs 10–30/bag across regions will be tested post mid-April during fresh dealer order cycles. While cost pressure may peak by H1 FY27, price increases are likely to trail cost inflation, in the brokerage's view.
Estimate revisions and valuations:
HDFC Securities has cut its average margin estimates for FY26/27/28E by ~Rs 10/75/45 per MT. It now expects margin expansion of Rs 120/60/95 per MT during FY26E/FY27E/FY28E respectively.
Ebitda and target price estimates have been reduced for all companies. The brokerage lowers Ambuja Cement's target multiple to 15.5x (from 16.5x earlier) due to slower-than guided margin improvement and organic capacity additions.
Valuation multiples for other companies and ratings across the coverage universe are maintained.
UltraTech Cement, JK Cement, and Ambuja Cement are HDFC Securities top picks in the sector.
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