Latest news with #UltratechCement
Economic Times
2 days ago
- Business
- Economic Times
Ambuja, Ultratech top cement bets as long-term tailwinds emerge, says Nomura
Spreads improve as prices rise, fuel costs fall Live Events Prices up, but discipline concerns remain (You can now subscribe to our (You can now subscribe to our ETMarkets WhatsApp channel India's cement sector may be turning a corner, with Nomura placing its confidence in Ambuja Cements and Ultratech Cement as its top investment ideas in the space. Citing improving sector spreads, long-term demand momentum, and easing fuel costs , the brokerage said it prefers large-cap companies actively implementing sustainable cost-saving measures, as these players are best positioned to benefit from an eventual earnings Cements, owned by the Adani Group, has been assigned a 'buy' rating with a target price of Rs 690, implying a 25% upside from its June 4 close of Rs 552. Ultratech Cement, part of the Aditya Birla Group, also retains a 'buy' rating with a target price of Rs 12,800, representing a 16% upside from its last close at Rs 11,033.'We remain positive largely on account of long-term tailwinds, such as: higher volume growth than in the previous decade (CAGR of 7% over FY25-27F vs 4% over the past decade) and sustainable cost-saving measures to drive reduction in operating costs,' analysts at Nomura brokerage said it is bullish on Ambuja, Ultratech, Shree Cement and Ramco Cements Nomura said average cement spreads in Q1FY26 improved by Rs 171 per tonne quarter-on-quarter to Rs 2,652 per tonne, driven by a 3% rise in trade prices and a small dip in fuel costs. 'The 90-day lagged spread displays a high correlation with the industry unitary EBITDA (>0.85),' the brokerage international prices of pet coke and thermal coal, key inputs for cement production, also point to a more benign cost environment. 'The downward trajectory of global fuel costs is a positive for the India cement industry,' the brokerage all-India average cement prices rose by Rs 2 per bag month-on-month in June and Rs 12 per bag quarter-on-quarter in Q1, Nomura remains cautious about the sustainability of pricing gains. 'We remain cautious about a recovery in trade prices, as we believe that pricing indiscipline amid industry consolidation will likely keep trade prices range-bound.'In contrast, volume trends appear more promising. Nomura projects a 7% compound annual growth in demand through FY27, nearly double the pace seen in the previous decade. It believes companies focused on operational efficiency are best placed to benefit from this the other end of the spectrum, Nomura has maintained 'reduce' ratings on Dalmia Bharat ACC and Nuvoco, citing concerns over earnings quality and weaker margin read | Will cement stocks be surprise outperformers in the next bull run? 6 stocks with an upside potential of up to 57% (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of the Economic Times)
Time of India
2 days ago
- Business
- Time of India
Ambuja, Ultratech top cement bets as long-term tailwinds emerge, says Nomura
India's cement sector may be turning a corner, with Nomura placing its confidence in Ambuja Cements and Ultratech Cement as its top investment ideas in the space. Citing improving sector spreads, long-term demand momentum, and easing fuel costs , the brokerage said it prefers large-cap companies actively implementing sustainable cost-saving measures, as these players are best positioned to benefit from an eventual earnings upcycle. Ambuja Cements, owned by the Adani Group, has been assigned a 'buy' rating with a target price of Rs 690, implying a 25% upside from its June 4 close of Rs 552. Ultratech Cement, part of the Aditya Birla Group, also retains a 'buy' rating with a target price of Rs 12,800, representing a 16% upside from its last close at Rs 11,033. 'We remain positive largely on account of long-term tailwinds, such as: higher volume growth than in the previous decade (CAGR of 7% over FY25-27F vs 4% over the past decade) and sustainable cost-saving measures to drive reduction in operating costs,' analysts at Nomura said. The brokerage said it is bullish on Ambuja, Ultratech, Shree Cement and Ramco Cements . Spreads improve as prices rise, fuel costs fall Nomura said average cement spreads in Q1FY26 improved by Rs 171 per tonne quarter-on-quarter to Rs 2,652 per tonne, driven by a 3% rise in trade prices and a small dip in fuel costs. 'The 90-day lagged spread displays a high correlation with the industry unitary EBITDA (>0.85),' the brokerage noted. Softening international prices of pet coke and thermal coal, key inputs for cement production, also point to a more benign cost environment. 'The downward trajectory of global fuel costs is a positive for the India cement industry,' the brokerage said. Prices up, but discipline concerns remain While all-India average cement prices rose by Rs 2 per bag month-on-month in June and Rs 12 per bag quarter-on-quarter in Q1, Nomura remains cautious about the sustainability of pricing gains. 'We remain cautious about a recovery in trade prices, as we believe that pricing indiscipline amid industry consolidation will likely keep trade prices range-bound.' In contrast, volume trends appear more promising. Nomura projects a 7% compound annual growth in demand through FY27, nearly double the pace seen in the previous decade. It believes companies focused on operational efficiency are best placed to benefit from this expansion. On the other end of the spectrum, Nomura has maintained 'reduce' ratings on Dalmia Bharat , ACC and Nuvoco, citing concerns over earnings quality and weaker margin profiles. Also read | Will cement stocks be surprise outperformers in the next bull run? 6 stocks with an upside potential of up to 57%
Indian Express
4 days ago
- Business
- Indian Express
Ramco Cements: A cyclical turnaround in the making?
Cement prices have remained flat for a decade, with South India bearing the brunt. However, with consolidation among major players and early signs of price recovery, Ramco Cements, which is trading near its 2017 peaks, could be poised for a turnaround. Owing to excess capacity, per bag prices of cement have increased by only 1.7% CAGR over the last 10 years, well below the average inflation rate over the period. Nowhere has this impact been felt more than in South India, where excess capacity has been the highest among regions. But the silver lining is that prices are expected to inch up owing to the consolidation drive by Ultratech Cement and Ambuja Cement. If there is recovery in pricing, one major player in the southern region – The Ramco Cements – could be a major beneficiary. While the stock is barely above the peak price it hit in 2017 of Rs 866 per share, there are enough reasons to dig deeper into the company. A climb and then a dip in sales and volumes From FY21 to FY24, Ramco Cements more than doubled cement volumes — from 8.3 million metric tonnes (MMT) to 18.0 MMT — driving revenue from Rs 5,303 crore to Rs 9,483 crore. However, despite surging volumes, EBITDA margins slid from ~29.8 percent in FY21 to ~15 percent in FY22 as global coal, petcoke, and diesel prices rose faster than selling prices in South India. By FY23, improving energy costs helped margins recover to around ~15 percent, and revenue climbed to Rs 8,172 crore. In FY24, volumes hit 18 MMT and revenue reached Rs 9,483 crore, with EBITDA margins at ~16 percent. Yet, in FY25, volumes plateaued near 18.2 MMT and revenue dipped 9 percent to Rs 8,554 crore, as renewed input inflation outpaced modest price hikes. Ramco's aggressive capacity additions fuelled top-line growth, but fluctuating energy costs and competitive pricing kept margins under pressure throughout FY21-25. At 14%, Ramco Cements' EBITDA margins are where they were nearly 10 years ago in 2014. With expected improvement in pricing discipline, margins should inch up from here. Profits and cash flow: Volatile but resilient While sales has been in an uptrend, owing to declining EBITDA margins (29-14%) and surging interest payments (Rs 88 crore-459 crore), profit after tax (PAT) has shrunk significantly from Rs 784 crore to Rs 270 crore (after exceptional items – other income of Rs 199 crore). But cash flows tell a different story. Cash flow from operations (CFO) remains strong. Though much of the CFO is used for debt servicing and capex, it reflects operational health. Hence, EV/EBITDA, not P/E, is a more appropriate valuation metric. Debt and interest coverage: A tight corner In a bid to maintain market share, Ramco has grown capacities aggressively, which it funded through debt. When margins were healthy, interest was a small blip (FY21, FY22). But as profitability dropped, interest coverage (EBITDA ÷ interest expense) tumbled from 14x in FY2021-22 to 3x in FY2024-25. Put simply, that means Ramco now has to spend a much larger share of its profit on interest. Management has sold non-core land assets (about Rs 455 crore realised so far, with another Rs 545 crore expected soon) to reduce debt and ease pressure. But until EBITDA climbs back up, investors must be watchful of the coverage ratio. Ramco financed its expansion with debt. As margins shrank, interest coverage dropped from 14x in FY22 to 3x in FY25 — a clear sign of stress. Understanding Ramco's business and the cement cycle How Ramco makes money: The basics Ramco sells bagged cement (OPC, blended cements) to builders, contractors, and cement distributors. It also sells ready-mix concrete and dry mortar (a small part of revenue). Its core markets are Tamil Nadu, Kerala, Andhra Pradesh, Karnataka, Odisha, and West Bengal. Ramco's advantage historically comes from: Scale & Integration: 11 plants, 22 MTPA capacity, captive limestone mines — this helps control costs. Green Power: Over 200 MW of wind farms + 43 MW waste-heat recovery — lower electricity costs. Distribution Network: 9,400+ dealers, 23,500+ sub-dealers — gets cement to tens of thousands of customers in villages, towns, and cities. Industry consolidation and competition After a slowdown in 2018-19, the Indian cement industry has seen consolidation. Giants like UltraTech and Ambuja have snapped up smaller players, especially in South India. In FY24 and FY25, Ramco had to keep plants running at high capacity to spread fixed costs, even when demand was weak. Meanwhile, pricing was lacklustre, i.e., supply outpaced demand. From FY21 through early FY2024, South Indian cement prices languished near multi-year lows. Ramco's response has been to expand in other regions, cut costs, and bank on its brand. They boosted green power use from 22% of total energy in FY22-23 to a planned 34% in FY2023-24. They built rail sidings to ditch diesel trucks. They also sold off non-core real estate to pay down debt. Demand outlook: Signs of a turnaround After years of weak pricing, South Indian cement prices finally began to stabilise in early FY25-26. Drivers included a combination of modest demand recovery (government infrastructure projects, rural housing) and relatively slower capacity additions in that region. South India cement prices had seen an uptick in April 2024, compared to April 2023, however, the price hikes did not sustain through the rest of the year. According to Nuvama Research, 'In May 2025, cement prices saw an increase across all regions, with the southern region leading the trend, followed by the eastern, central, and western markets. This price hike was mainly driven by an improvement in demand.' Given that the South Indian cement market is significantly consolidated compared to a year ago, the expectation is that these hikes will sustain themselves. And because South accounts for ~75% of Ramco's volumes, that would directly lift revenue and profitability. That's why, despite a grim FY25, FY26 could be much better. With most expansion behind them (no massive capex outlays planned beyond maintenance), Ramco can use existing capacity to serve recovering demand, so each incremental tonne sold adds right to the bottom line. A significant cost pressure has emerged with the introduction of a new Mineral Bearing Land Tax of Rs 160 per tonne of limestone in Tamil Nadu, effective from April 4, 2025. This rate is reported as the highest in India (e.g., Jharkhand levies Rs 40 per tonne). This tax is expected to increase the cost of cement production in the state by approximately Rs 200 per tonne. Given Ramco Cements' strong footprint in South India, this tax poses a direct and substantial threat to production costs and profitability. The cement industry has appealed to the Tamil Nadu government for relief. The outcome of this request will be critical — an unfavorable decision could result in a structural cost hike for Ramco. Valuation: Is Ramco a good buy now? At Rs 988 per share, Ramco's trailing P/E is roughly 85x earnings. That may sound high, but cement stocks often trade at high P/Es because profits are low. For comparison: UltraTech Cement: 54 P/E Ambuja Cements: 33 P/E Shree Cement: 94X P/E Ramco: 85X P/E Ramco's P/E at 85X reflects a cyclical trough in earnings (not a premium growth multiple). Thus P/E is usually not a great valuation metric for 'cyclical stocks'. P/B comparison: Cheaper on book value P/B is a better metric for comparing valuations for cement companies. Let's take a look : UltraTech and Shree trade at 4.5x and above Ambuja Cement trades at 2.5x book value Ramco trades at ~3.1× book value That tells us that Ramco's assets (plants, land, mines) are valued more cheaply relative to some of the larger peers. Based on its 10-year historical media value of 3.5x, Ramco trades at a reasonable discount. The bottom line: Betting on a cycle turn Ramco is a cyclical bet. You're wagering that the Indian cement cycle is on the upswing—volumes rising, prices firming, costs stabilizing. If that plays out, the stock today is a 'value' (relative to peers) at mid-teens EV/EBITDA and 2.7x P/B. But if your horizon is a few quarters, wait for clearer signals of demand and pricing. If you can hold for more than 12-18 months, Ramco's cyclical upswing could lead to far better performance by the company. Note: We have relied on data from and throughout this article. Only in cases where the data was not available, have we used an alternate, but widely used and accepted source of information. Rahul Rao has helped conduct financial literacy programmes for over 1,50,000 investors. He has also worked at an AIF, focusing on small and mid-cap opportunities. Disclosure: The writer or his dependents do not hold shares in the securities/stocks/bonds discussed in the article. The website managers, its employee(s), and contributors/writers/authors of articles have or may have an outstanding buy or sell position or holding in the securities, options on securities or other related investments of issuers and/or companies discussed therein. The content of the articles and the interpretation of data are solely the personal views of the contributors/ writers/authors. Investors must make their own investment decisions based on their specific objectives, resources and only after consulting such independent advisors as may be necessary.
New Indian Express
21-05-2025
- Business
- New Indian Express
Indian equities rebound on Wednesday after yesterday's sharp sell-off
CHENNAI: Indian equities rebounded on Wednesday after yesterday's sharp sell-off, although momentum remained restrained in the absence of strong directional triggers. The BSE Sensex rose 392 points or 0.48% at 81,579, while the NSE Nifty advanced 116 points or 0.47% at 24,800. Market Highlights The rebound comes a day after foreign institutional investors (FIIs) offloaded Indian equities worth a massive ₹10,016 crore, dragging benchmarks sharply lower on Tuesday. Today's gains were led by defensive and consumer-oriented stocks, while broader market indices underperformed. Wednesday's top gainers on Sensex include Sun Pharma (+1.5%), Nestle India (+1.3%) Ultratech Cement (+1.2%), HUL (+1.1%), HDFC Bank (+0.9%), Tata Motors (+0.7%), Maruti Suzuki (+0.5%). While key stocks that dragged the Sensex were Reliance Industries (-0.6%), Bajaj Finance (-0.5%), Kotak Bank (-0.4%), Adani Ports (-0.3%), IndusInd Bank (-0.3%).
Reuters
29-04-2025
- Business
- Reuters
India's benchmark indexes to open higher on easing trade tensions, FPI inflows
April 29 (Reuters) - India's benchmark indexes are poised to open higher on Tuesday, supported by easing trade tensions between the U.S. and its trading partners and sustained foreign inflows that have bolstered investor sentiment. Gift Nifty futures were trading at 24,484.5 as of 7:16 a.m. IST, indicating the Nifty 50 (.NSEI), opens new tab will open higher than Monday's close of 24,328.5. Other Asian markets also opened higher, with the MSCI Asia ex-Japan index (.MIAPJ0000PUS), opens new tab gaining 0.25%. Gold prices fell on Tuesday as easing trade tensions dented the metal's safe haven appeal. U.S. Treasury Secretary Scott Bessent said on Monday that many top trading partners made "very good" tariff proposals. One of the first deals to be signed would likely be with India, he said, adding that a deal could be sealed this week or the next. Meanwhile, U.S. Commerce Secretary Howard Lutnick said in a statement from the White House that U.S. President Donald Trump will move to reduce the impact of his auto tariffs, signalling easing trade war concerns. India's Nifty 50 (.NSEI), opens new tab rose 1.2% on Monday, helped by better-than-expected earnings from heavyweight Reliance Industries and sustained foreign inflows. Foreign portfolio investors continued to buy Indian shares for the ninth straight session on Monday, provisional data from the NSE showed. This is the longest daily FPI buying streak since early July 2023. Among individual stocks, the focus will be on private lender IndusInd Bank ( opens new tab and cement maker Ultratech Cement ( opens new tab. IndusInd Bank announced the resignation of deputy CEO Arun Khurana, weeks after the bank disclosed accounting lapses in its derivatives portfolio. Ultratech Cement ( opens new tab reported March quarter profit below market expectations and said soaring summer temperatures have hit construction activity and cement demand in India. Auto maker TVS Motor Company ( opens new tab could rise after it reported a better-than-expected fourth-quarter profit on Monday, led by steady demand for its two-wheelers and continued growth in exports.
