Analysts see 15–25% upside in cement stocks despite valuation caution

Mumbai: Shares of cement companies have seen renewed buying interest in the past few weeks following a rise in prices, expectations of strong first quarter results despite the onset of monsoons, and an expected FY26 rebound from circumspect sales last year.

Analysts said that even on the technical charts, some stocks indicate a breakout.

Companies such as UltraTech Cement, Grasim Industries, Ramco Cements, Ambuja Cements, JK Cement and Shree Cement have advanced 5-11% in the past one month, recouping some of the losses made in the previous year. The benchmarks Nifty 50 and Nifty 500 have gained 1.8% and 1.7% in this period, respectively.

"Cement price hikes taken in June have sustained for the first time in a while, and coupled with reduced cash discounts, have kept net realisations for the companies stable through the first quarter," said Manish Valecha, research analyst at Anand Rathi Institutional Equities. "A low-base effect from last year, when growth slowed to 3-4% due to elections, is also expected to boost this year's growth to 7-8%, starting from Q1."

Valecha also said that pet coke prices have remained stable, helping keep input costs in check. Petroleum coke, or pet coke is used as a fuel in the production process.

Sham Chandak, head of institutional equities at Elios Financial Services, said current Indian demand for cement is 440 million tonnes per annum (mtpa), which is likely to grow to 620 mtpa by 2030.

"After a benign couple of quarters, average cement prices rose by 8% year-on-year in Q1FY26, reaching ₹360 per bag. Declining input costs (especially coal and diesel) have led to margin improvements, and a sharp decline in interest rates further improves margins," he said.

This increase in demand, coupled with pricing power and cost efficiency is likely to keep buyers interested in cement stocks.

"Cement stocks have seen a renewed buying interest in the last couple of weeks with stocks within the sector witnessing price up moves supported by rising volumes," said Ruchit Jain, vice president at Motilal Oswal Financial Services.

Agencies

What should traders and investors do?
Jain said that stocks like Ultratech Cement have given a breakout from 12-months consolidation phase indicating the start of a fresh uptrend. "We expect the stock to rally towards ₹13,200 in the short term while the ₹12,300-12,200 range is expected to act as a support," he said. This indicates 5.5% upside from Friday's close.

Jain also said that Ramco Cements too has been showing signs of outperformance within the sector and has a bullish set-up, it may move towards ₹1,200 in the short term. That would imply gains of almost 10% from its current price.

Valecha said he expects strong first-quarter results in the sector, particularly from South-based companies.

"Valuations remain attractive, with large-caps offering 15-20% upside and midcaps likely to deliver 20-25% returns over the next year. We prefer UltraTech among large-caps and JK Cement in midcaps," he said.

Chandak said that current valuations have priced in the near term positives, leaving little value on the table, but cement remains a good play over the 3-5 years period.