CLSA Raises Price Targets for Dalmia Bharat and ACC, Prefers Ambuja and UltraTech
CLSA has turned positive on India’s cement sector, citing improved earnings visibility for 2025. The brokerage has upgraded its ratings for Dalmia Bharat and ACC, forecasting a recovery in their earnings and highlighting significant opportunities within the sector. This positive outlook is based on the anticipated rebound in the cement market, with CLSA seeing improving demand dynamics and a more favorable operating environment for cement companies in the coming year.
As part of its upgraded stance, CLSA raised the price target for Dalmia Bharat to ₹2,110, reflecting an upside of 17 percent, and for ACC, the target was increased to ₹2,580, indicating an upside potential of 28.5 percent. Both companies have faced challenges over the past year, with cement stocks underperforming largely due to prior earnings downgrades. However, CLSA now sees a clearer path to recovery, driven by factors such as improved demand, operational efficiencies, and potential price hikes in key markets. Despite the sector trading at a slight premium to its historical median, CLSA remains optimistic about the recovery prospects. Cement stocks have faced pressure due to a variety of factors in recent months, including rising input costs and a slowdown in infrastructure development. However, with the anticipation of better earnings in 2025, the brokerage believes that cement stocks are poised for a strong rebound. The expectation is that the worst may be over, and earnings will likely recover as demand strengthens and input cost pressures stabilize.
Among the key companies in the sector, CLSA has identified Ambuja Cement and UltraTech Cement as its top picks. Both of these companies are expected to outperform their peers due to their strong market positioning, superior operational efficiency, and robust balance sheets. CLSA anticipates that these companies are well-placed to capitalize on the anticipated recovery in the cement sector and will benefit from improved pricing power and higher volumes. The recovery in the cement sector is expected to be supported by several factors. One of the most important is the increase in infrastructure spending, which has been a key driver of cement demand. As the government continues to invest in infrastructure projects, such as roads, highways, and housing, cement producers are expected to benefit from the increased demand for construction materials. Additionally, there are expectations that the commercial and residential real estate sectors will see a rebound, which will further support cement consumption.
CLSA’s optimistic outlook also reflects broader macroeconomic trends. With a more stable economic environment in 2025, the potential for inflationary pressures to ease, and the likelihood of continued government focus on infrastructure development, the brokerage expects the cement sector to see an upward trajectory. As energy prices stabilize and logistical challenges subside, cement producers will likely experience margin expansion, contributing to higher profitability. CLSA’s upgraded stance on the cement sector is a reflection of its positive outlook for earnings recovery and growth in 2025. The brokerage sees a strong recovery path for cement companies like Dalmia Bharat and ACC, with Ambuja Cement and UltraTech Cement standing out as top picks. Despite trading at a slight premium to historical levels, the sector is poised for growth, making it an attractive investment opportunity in the coming year.
