Axis Securities’ Top Cement Stock Picks with High Growth Potential

Axis Securities has identified three cement stocks with significant growth potential, citing strong demand and better price realizations as key factors. The brokerage has assigned 'Buy' ratings to UltraTech Cement Ltd, JK Cements Ltd, and Ambuja Cements Ltd, projecting an upside of up to 29%.

According to Axis Securities, the long-term fundamentals of the cement sector remain positive, with demand expected to grow at a compound annual growth rate (CAGR) of 7-8% over FY24-27E. The sector is expected to benefit from infrastructure expansion, urbanization, and increasing construction activity. Consolidation within the industry is likely to provide advantages to larger players, leading to improved operational efficiencies and better pricing power.

UltraTech Cement: Market Leadership and Expansion Strategy

UltraTech Cement continues to maintain its dominant position in the industry, with its capacity expansion plans progressing as scheduled. Axis Securities expects the company to increase its market share from the current 25% to 28%, supported by higher production capacity and improved efficiency.

UltraTech's volume is projected to grow at an 11% CAGR over FY24-27E. The brokerage also anticipates a reduction in operational costs by Rs 200-300 per tonne over the next 2-3 years. As a result, the company's EBITDA margin is expected to rise to 22% by FY27E, driven by higher volumes, improved realizations, and cost optimization measures.

Following the third-quarter (Q3 FY25) results, Axis Securities has set a target price of Rs 13,510 for UltraTech Cement, implying a potential increase of 17.56% from its closing price of Rs 11,491.60.

JK Cements: Strong Performance and Revenue Growth

JK Cements has demonstrated strong operational performance, benefiting from higher realizations and operating leverage. In Q3 FY25, the company's EBITDA per tonne improved by 54% quarter-on-quarter, reaching Rs 1,000. This upward trend is expected to continue into Q4 FY25, supported by sustained demand and favorable pricing conditions.

Axis Securities forecasts JK Cements’ volume, revenue, EBITDA, and adjusted profit after tax (APAT) to grow at a CAGR of 12%, 10%, 25%, and 36%, respectively, over FY24-27E. The brokerage has set a target price of Rs 5,380 for JK Cements, indicating a potential upside of 12.10% from its current price of Rs 4,799.15.

Ambuja Cements: Maximum Growth Potential

Among the three selected stocks, Ambuja Cements has been given the highest growth projection. The brokerage has set a target price of Rs 655, representing a 29.31% increase from its current level of Rs 506.55.

Ambuja Cements has undertaken several initiatives to reduce operational costs. These include lowering the clinker factor, optimizing logistics costs, and increasing the sale of blended cement. The company aims to improve its EBITDA margin to 18-19% by FY26E.

Strong demand from infrastructure projects and the housing sector is expected to support growth in H2 FY25. The government's continued investments in roads, railways, and commercial projects are likely to drive higher demand. The company anticipates industry-wide cement demand to grow in the range of 4-5% during FY25.

Sector Consolidation and Growth Prospects

Axis Securities remains optimistic about the sector, highlighting that large cement players will benefit from consolidation through economies of scale, supply chain efficiencies, and better pricing strategies. Despite continuous capacity additions, long-term demand is expected to exceed supply, ensuring stable growth for the industry. With favorable economic conditions, increasing infrastructure investment, and steady demand for housing and commercial projects, the cement sector is expected to maintain its growth trajectory in the coming years.