On December 2, cement stocks experienced a notable rally, led by UltraTech Cement, which surged over 3% and topped the Nifty 50 gainers list. The rally was driven by optimism stemming from a positive outlook for the Indian cement sector, particularly in the second half of the fiscal year. Jefferies, a leading brokerage firm, expressed confidence in a recovery for cement companies, forecasting a growth spurt driven by improving demand conditions.
Other major players in the sector, including Shree Cement, India Cements, JK Lakshmi Cement, JK Cement, Andhra Cements, and ACC, also saw gains between 2% and 3%, further adding to the positive momentum. Jefferies specifically singled out UltraTech Cement as its top pick among large-cap stocks and JK Cement as its favourite mid-cap stock, citing improving demand dynamics and the bottoming out of cement prices. According to Jefferies, demand growth showed moderate improvement in October and November, and this positive momentum is expected to continue into the fourth quarter, with a boost from anticipated government capital expenditure (capex). The brokerage projected an 8-10% volume growth in the second half of FY25, contrasting with a flat performance in the first half.
Regionally, the cement market showed mixed trends. Northern India saw strong performance in November, with prices firming up due to restricted supply in Delhi following construction bans. In contrast, Central India, including cities like Lucknow and Bhopal, experienced pricing pressures across construction materials. The Southern region faced price declines due to sluggish demand and intensified competition. UltraTech Cement’s expansion plans also played a role in boosting investor confidence. The company announced an increase in production capacity at its Kukurdih unit in Chhattisgarh, from 2.7 MTPA to 3.3 MTPA through a process known as debottlenecking. This move is part of the company’s ongoing capacity expansion strategy, with UltraTech now boasting a total cement capacity of 156.66 MTPA, including its international operations.
The company’s expansion strategy is in line with India’s growing infrastructure needs and its broader economic growth story. UltraTech anticipates a sustained 7-8% volume growth in the coming years, driven by increased government spending on infrastructure and rising demand from the urban housing sector. Brokerages like Prabhudas Lilladher also share the optimistic view, predicting improved cement demand in H2FY25, supported by government infrastructure spending, a strong monsoon that boosts rural economies, and stable urban housing demand. UltraTech Cement and ACC are both favoured picks in the sector.
