Cement stocks trade mixed after CLSA warns of a ‘speed bump’ for sector this year

Cement stocks staged mixed moves in early trade on Monday after foreign brokerage CLSA said it expects growth in the sector tapering to mid-single-digits in 2024 though cost tailwinds may further boost profitability. Stocks such as Shree Cement and UltraTech Cement traded up to one per cent higher at the last count while Ambuja Cement dropped three per cent.

CLSA said it sees “a speed bump ahead” for the sector in 2024 and that it expects the following themes dominating the cement space during the course of the year:

--Industry growth tapering to mid-single-digits on a high base from as the elections weigh on demand

--Utilisation staying muted on account of aggressive capacity expansion

--Cost tailwinds further boosting profitability

CLSA also expects larger companies to continue to gain market share, as consolidation remains a key trend in the sector, and pegs the EBITDA growth in its coverage universe at 26 per cent on a year-on-year basis, citing stretched valuations.

CLSA has Dalmia Bharat and UltraTech are its preferred picks in the cement space.

Here’s what the brokerage makes of the various stocks in its coverage in the sector: