Macquarie Upgrades Cement Sector Amid Recovery, Targeting 20% Gains
Macquarie has issued a positive outlook for India’s cement sector, forecasting a demand recovery and price hikes that will likely boost margin expansion in the second half of calendar year 2024 (2H CY24). The brokerage expects these factors, combined with an emphasis on cost management and capacity consolidation, to strengthen the industry’s medium-term earnings profile. In a recent report, Macquarie upgraded its stance on several leading cement stocks, signalling strong growth potential.
Stock Upgrades and Target Prices
Macquarie raised its target price for Ultratech Cement to ₹11,868, suggesting a potential upside of 12% from Monday’s closing price. The stock rose by over 3 percent on Tuesday, peaking at ₹10,950. Ambuja Cements also received an upgrade, with a target price set at ₹618, offering a more than 15 percent upside from its previous closing price. The stock gained 2.6 percent on Tuesday, touching an intraday high of ₹548.5. For ACC Ltd, Macquarie set a target price of ₹2,425, indicating a potential upside of over 20 percent from its prior close. ACC’s shares increased by 2.5 percent on Tuesday, reaching ₹2,061 on the BSE. All three cement stocks were upgraded to an “Outperform” rating, reflecting Macquarie’s confidence in their ability to outperform the broader market in the coming months.
Ramco Cement and Shree Cement Outlooks
However, the brokerage downgraded Ramco Cement to “Underperform,” setting a target price of ₹785, a potential downside of 12 percent from Monday’s closing level. The downgrade is attributed to concerns about Ramco Cement’s near-term performance, despite the overall positive outlook for the industry. On Shree Cement, Macquarie maintained a “Neutral” rating, with a target price of ₹25,710, indicating a modest upside of over 2% from the previous close. This more cautious stance reflects the current market conditions and the stock’s recent performance.
Sector Outlook
Macquarie’s report underscores the positive prospects for the cement sector, citing factors such as the recovery in demand, ongoing cost efficiency measures, and the consolidation of production capacities. These developments are expected to support margin growth and foster earnings improvements over the medium term. The brokerage’s bullish stance on key cement stocks suggests confidence in their ability to weather market challenges and benefit from the anticipated industry tailwinds.
