UltraTech Cement, Dalmia Bharat & JK Cements: Axis Direct shares top conviction stock picks

Axis Direct has reiterated a positive outlook on India's cement sector, citing strong long-term demand drivers and consolidation benefits. The brokerage identified UltraTech Cement Ltd, Dalmia Bharat Ltd and JK Cement Ltd as its top conviction stock picks from the select space, assigning each a 'Buy' rating.

In its sector note, the domestic brokerage said, "We remain positive as long-term demand drivers are intact and expect cement demand to grow at a CAGR of 7%-8% over FY24-27E. Sector consolidation is expected to benefit large players through economies of scale, supply chain efficiency, and better pricing in the long term. Cement prices, regional demand and supply dynamics, and trends in fuel costs will be key monitorables."

Axis highlighted that these three cement manufacturers are well-positioned to benefit from capacity expansion, operating leverage and cost-efficiency measures.

UltraTech Cement

For UltraTech Cement, Axis Direct said, "With expanded capacity and scale, the company is positioned to strengthen its market leadership, targeting a market share increase from 25 per cent to 28 per cent. We project volume growth at a 14 per cent CAGR over FY25–27E."

The brokerage noted, "The company projects a total cost reduction of Rs 200–300 per tonne over the next 2–3 years. We project that its EBITDA margins will increase to 21 per cent in FY27E, driven by higher volume, better realisations, and cost optimisation initiatives."

It has assigned a target price of Rs 14,000 for UltraTech.

Dalmia Bharat

Commenting on Dalmia Bharat, Axis pointed to progress in the company's capacity expansion programme. The brokerage mentioned that the company has commenced commercial production at its 3.6 million tonnes per annum (MTPA) clinker unit in Umrangso, Assam, calling it a key milestone.

"These expansion initiatives are expected to drive future volume growth, supported by its current capacity utilisation of 60 per cent, which provides significant headroom for operating leverage. The company is projected to deliver a 7 per cent volume CAGR over FY25–27E," Axis said.

"Quarterly performance was aided by a 9 per cent YoY increase in volume, reaching 7.3 mtpa. With cement prices expected to improve in Q4, driven by better demand, margins are expected to stay elevated moving forward," it also stated.

"In parallel, Dalmia is actively pursuing cost-saving initiatives, targeting a reduction of Rs 150–200/tonne over the next two years through enhanced operational efficiency and process optimisation," Axis's note added.

The brokerage has set an upside target price of Rs 2,520 for Dalmia Bharat.

JK Cement

On JK Cement, Axis said, "The company delivered a positive operating performance during the quarter, supported by volume growth and lower cost, leading to a 4% QoQ improvement in EBITDA per tonne to Rs 929."

It added, "This positive momentum is expected to sustain through FY26, backed by robust cement demand and better realisations."

Axis further said, "The company anticipates savings of Rs 150-200 per tonne in the next 2 years. We expect it to report an EBITDA margin in the range of 19-20 per cent, driven by higher volumes, stable realisations, and lower costs."

For JK Cement, Axis Direct has assigned an upside target price of Rs 2,520.