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ICICI Securities Report
With the dust settling we see the sector in a sweet-spot. We upgrade UltraTech Cement, Grasim Inds, Shree Cement, JK Cement and Nuvoco Vistas to a 'Buy' even as we maintain Ambuja Cement as our top-pick.
The guns have likely fallen silent after the recent conquests (acquisitions) and war chests have thinned in the aftermath. But in its wake, we turn positive on the cement sector (Neutral earlier). We opine that eyes shall now be set on the spoils of war. We hypothesise:
Leverage may not be the weapon of choice for cement majors (UltraTech/Ambuja) to raise capacity share further through inorganic route.
An exhaustion of low-cost M&As, as potential deals may command lofty premiums; thereby discouraging bids. This, in turn should blunt competitive intensity as cement majors sharpen focus on sweating recent acquisitions (for commensurate margins with parent entity) and organic growth.
A convalescing cement demand (flat in H1FY25) helps reverse plummeting cement prices (currently at a four-year low) while benign fuel cost cushions margins.
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