JM Financial retains 'Hold' on Sagar Cements; target prices for ACC, Ambuja & others

JM Financial has reiterated its 'Hold' rating on Sagar Cements with a target price of Rs 29,390 after an in-depth evaluation of its Dachepalli plant in Andhra Pradesh. This assessment reflects the company's strategic positioning in the cement industry and anticipates future growth trajectories.

The brokerage explained that the Southern cement market has seen price increases of Rs 45–50 per bag, equating to a 10-11 per cent rise on a quarter-on-quarter basis since March 2025. "The management noted that, after a couple of years of pricing pressure, average cement prices in South have increased by Rs 45–50 per bag (10–11 per cent QoQ basis) from exit of Mar’25 and sustained well in the market," they stated. This price stability is crucial for the company as it seeks to expand its market presence.

Sagar Cements aims to leverage this favourable pricing environment to boost its volume growth between 9 per cent and 14 per cent year-on-year to reach 6–6.3 million tonnes in FY26. The company also plans to nearly double its production capacity, targeting 20 million tonnes by FY35. This ambitious plan is part of a broader strategy to enhance the company's competitive edge in the industry.

Significant expansion is underway at the Dachepalli plant, with plans to increase clinker and cement capacities by 25 per cent and 33 per cent respectively by FY26. These expansions are expected to enhance the plant's output to 2.31 million tonnes of clinker and 3 million tonnes of cement. The plant, spread across approximately 400 acres, is well-positioned to serve key markets in Andhra Pradesh, Telangana, and Tamil Nadu.

Additionally, Sagar Cements anticipates a substantial cash infusion from the sale of Vizag land parcels, expected to generate net proceeds of Rs 3.5 billion, approximately 12 per cent of the company's market capitalisation. This is anticipated to support the company’s growth initiatives and manage debt levels effectively, ensuring financial stability in the long term.

In terms of industry context, JM Financial has maintained its 'Buy' rating on ACC, Ambuja Cements, Birla Corp, JK Cement, and UltraTech Cement. "The brokerage maintained its 'Buy' rating on ACC, Ambuja Cements, Birla Corp, JK Cement and UltraTech Cement. It has 'Hold' on Dalmia, Ramco Cements, Shree Cement and Star Cement among others," they added.

The outlook remains positive with ongoing expansions expected to elevate Sagar’s clinker and cement capacities by 7 per cent and 14 per cent to 7 million tonnes and 12 million tonnes respectively by the second quarter of FY27. This aligns with the company's broader objective of capacity doubling every decade, a testament to its long-term growth vision.

In the coming years, the company aims to improve its cost structure by installing a six-stage pre-heater and a 6MW solar plant by August 2025. These initiatives underscore Sagar's commitment to sustainable growth and operational efficiency in a competitive market. Such measures are expected to reduce operational costs and enhance profitability, further solidifying Sagar Cements' position in the industry.