Goldman Sachs has forecasted FY25 as one of the weakest years for profitability in the cement sector in recent memory. The firm also indicated that FY26 may see only marginal improvement. Despite these challenges, large players in the sector are expected to sustain premium valuations due to market share consolidation, capacity expansions, and long-term investments in resources.
Goldman Sachs maintained a ‘Buy’ rating on UltraTech Cement, with a 12-month target price of ₹12,460. It has a neutral stance on Shree Cement, Dalmia Bharat, and Ambuja Cements, while giving a ‘Sell’ rating on ACC. The target prices for these stocks are ₹27,670 for Shree Cement, ₹1,985 for Dalmia Bharat, ₹575 for Ambuja Cements, and ₹2,345 for ACC. The brokerage revised its EBITDA estimates for FY25-FY27 downward, mainly due to limited price hikes in Q3 and the ongoing supply-demand imbalance in the sector. This adjustment reflects Goldman Sachs’ muted long-term pricing assumptions. However, valuation multiples were left unchanged for most companies, except for UltraTech Cement, whose multiple was slightly reduced to align with its long-term median levels.
Key trends reshaping the cement sector were also highlighted in the report. Large players are continuing to consolidate market share, expand capacity, and make significant investments in green energy initiatives. Furthermore, the acquisition of limestone reserves by leading companies is expected to ensure future growth and operational stability. Despite the near-term profitability challenges, Goldman Sachs remains optimistic about the long-term outlook for the cement sector, particularly for well-established players. The ongoing industry transformation supports a *premium valuation* for these players compared to historical averages. However, the brokerage cautioned that the competition for volume share may intensify in the next 12-18 months as larger players ramp up the utilization of their newly acquired assets. This could limit pricing power and profitability gains, even as demand recovers and input costs stabilise. While the near-term outlook for the cement sector remains subdued, Goldman Sachs believes the long-term potential for large players like UltraTech Cement remains strong.
