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PL Capital Report
Brokerage firm PL Capital has retained its 'Overweight' stance on the Indian cement sector, citing resilient cement prices despite seasonal weakness, while cautioning that weak demand conditions, elevated fuel costs and poor monsoon trends could weigh on margins in the coming quarters.
PL Capital has recommended accumulating selective cement companies with diversified market presence, superior cost management and attractive valuations. Its top picks are UltraTech Cement, JK Cement and Nuvoco Vistas, while it maintains positive ratings on several other cement names despite a mixed demand environment and margin pressures.
Among its coverage universe, ACC, offers the highest upside potential of about 72% with a 'Buy' rating and JSW Cement offers the lowest upside potential of around 11% with an 'Accumulate' rating, followed by Ambuja Cement (22%, Buy), UltraTech Cement (21%, Buy), Dalmia Bharat (20%, Buy), Shree Cement (24%, Accumulate), JK Cement (22%, Accumulate), JK Lakshmi Cement (36%, Buy), Nuvoco Vistas (58%, Buy).
Outlook
PL Capital highlights that Q2 remains a seasonally weak quarter for the cement industry, and the ongoing Middle East crisis has kept P&F, freight and other operating costs elevated, increasing uncertainty around margins for H2 FY27.
While cement prices holding up during August, the peak monsoon month, is encouraging, but alarmingly lower rainfall across southern states, Rajasthan and half of MH/GJ this year doesn't augur well for FY28 demand.
A price hike in Sep'26 would provide some relief; however, in its absence, continued cost pressures are likely to weigh on margins in Q3.
Hence, the sustainability of current price levels and the industry's ability to implement further hikes will remain key monitorables going ahead.
PL Capital believe this is a good time to accumulate selective companies having diversified market presence, better cost management and muted valuation.
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