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CLSA's Agarwal Favors Ultratech as Cement Demand Exceeds Expectations
- •CLSA's Indrajit Agarwal notes stronger-than-expected cement demand in India, particularly in northern and western regions, despite profitability pressures from higher fuel costs and the seasonally weaker Q2.
- •Agarwal anticipates a near-term hit to margins in Q2 due to lower fixed-cost absorption and the full impact of increased petcoke prices, expecting an EBITDA correction of ’200-250 per tonne.
- •Cement prices are expected to improve post-monsoon and festive season, with a projected 1-1.5% increase by year-end and a stronger 2-3% rise around March-April.
- •Agarwal prefers large-cap cement stocks like Ultratech Cement due to their volume growth visibility, cost-saving initiatives, and current discount to historical valuations, also seeing value in Shree Cement and Ambuja Cements.
- •Cost reduction through additives, renewable power, and waste heat recovery, along with continued industry consolidation via organic capacity additions, are identified as crucial structural levers for cement companies.
Key Questions Answered
Indrajit Agarwal, Senior Research Analyst at CLSA, expects pan-India cement volumes to grow in the mid- to high-single digits during the July-September quarter of 2026 (Q2FY27), driven by stronger-than-expected demand in northern and western India despite seasonal pressures.
CLSA highlights Ultratech Cement as its high-conviction outperform pick in the large-cap space, supported by its achievable cost-saving guidance and clear capacity additions. Shree Cement and Ambuja Cements are also favored for focusing on profitability over volume chasing.
Indian cement companies are reducing energy costs and improving environmental performance through renewable power, waste heat recovery, and the use of industrial additives like fly ash and slag to lower clinker usage.
