Top 4 Cement Stocks to Buy in India 2024

Last Updated - Aug 2024

In this article, we will cover,

Top Cement Stocks in India

The Indian cement industry is the world's second-largest producer after China and is the third-largest consumer. Housing & Real estate consists of 65% share of cement demand followed by Public infrastructure, Industrial Development which is 25% and 10% respectively. Cement industry is currently going through a structural change as COVID-19 forced many companies to manage their costs effectively. Strong pricing levels across regions and low operating costs helped cement companies in not only overcoming the crisis but also getting back to growth in FY21. In terms of management commentaries many top cement companies have reinstated their CAPEX plans, which were put on hold due to the pandemic, and this shows that the confidence among large cement players is coming back and tough times are largely over. Over the medium-term cement companies are facing huge cost-related headwinds as most of the cement companies have reported increase in raw material, power and fuel costs backed by soaring energy and logistic costs will pose a challenge in maintaining elevated realisations and profits. Cooling of the commodity prices can cool down the prices and upscale the demand for cement.

List of Best Cement Stocks in India to buy now

*Data as on 9th August 2024

How to identify a good Cement company?

• Cement industry is a highly capital-intensive industry. A green field project for 1 MT requires capital expenditure to the tune of Rs.3 bn (2 MT is an ideal size for a company to have some kind of economies of scale).
• This sector operates with a high level of fixed cost (maintenance cost is around US$ 5 per tonne annually) and therefore volume growth is critical. Access to raw materials (limestone and coal) and consumer markets are equally important in the long term. Therefore, any material change in raw material prices or contracts with suppliers can hamper production to a huge extent. 
• The Indian cement industry has to be viewed on a regional basis viz, North/South/West/East. Demand may be favourable/unfavourable in some areas. It is also highly fragmented with top six companies already accounting for 60% of industry capacity, the rest 40% is distributed among 40 small players. So conservative investors should pick top companies atleast since the current scenario is challenging.  
• Cost factor plays a huge role in cement companies as more the savings in cost more will be their margins. So, a company which can control its freight, power and other fixed costs can score against its peers as the competition level is also very high amongst players in this sector.
• Since cement is a regional play on account of its high freight costs, the company should not have all its plants concentrated in one region. It should have a geographical spread so that adverse market conditions in one region can be mitigated by high growth in the other region.
• Important ratios to look for are EBITDA per tonne, Net Debt/EBITDA, Top & Bottom line growth, ROE & ROCE etc. Also, capacity utilization levels are equally important to look at while analysing a cement company as it shows how efficiently the company is utilising its capacities.

Top 4 Cement Stocks in India - Portfolio Companies

Shree Cements

Shree Cements which started operations at its first greenfield cement plant in Beawar, Rajasthan, in 1979, is the second largest cement group in India with operational capacity of 46.4 million tonnes per annum (mtpa) as on March 31, 2022. From 100% of its capacity being in northern India until 2014, the company has diversified across Rajasthan, Uttarakhand, Bihar, Chhattisgarh, Haryana, Uttar Pradesh, Karnataka, Jharkhand, Odisha and Maharashtra. Its cement production has grown at a CAGR of 13.14% from  13.5 mtpa in  2011-12 to 46.4 mtpa in 2021-22. Moreover, its capacity has grown from 210 MegaWatt (MW) in 2011-12 to 771 MW. The company is among the efficient players in the cement industry. Its operating efficiency arises from a sharp focus on operations, low power consumption, and mainly sale of blended cement resulting in reduced consumption of energy and raw material per tonne of cement. Flexibility (to switch to grid or to shut down the plant based on merchant tariff) and ability to operate with multiple fuels (imported coal or petcoke) helps keep generation cost competitive. The operating profit per tonne of cement remains one of the highest in the industry. Shree Cements continues to enjoy its leadership position in northern markets despite improved presence of top cement players through recent inorganic means, 60% of its total volumes come from the north regions and demand from this region was the least impacted due to COVID-19 lockdowns. The company added a 3rd clinker kiln having capacity of 4 mtpa in Raipur district of Chhatisgarh and was completed six months ahead of the targeted completion date. It has also reiterated its vision of doubling its current capacity of 40 MTPA to 80 MTPA in the next 6-7 years. It continues to face headwinds related to its costs. The rising operating and fuel costs impacted its growth and margins in FY22 and the H1FY23. However, with inflation softening and newer orders at higher commodity prices will aid the margins.

UltraTech Ltd

UltraTech is among the largest global cement manufacturers and the largest manufacturer of grey cement, ready mix concrete (RMC) and white cement in India. It has a consolidated capacity of 121.5 mtpa including UNCL and the cement business of Century. It has 23 integrated plants, 27 grinding units and  8 bulk terminals. Its operations are across India, UAE, Bahrain, Bangladesh and Sri Lanka. With  175+ RMC plants in 41 cities as of FY22, UltraTech is the largest manufacturer of concrete in India. It also has a slew of speciality concretes that meet specific needs of discerning customers. Moreover, the company has a network of 30000+dealers across the country with a market reach of more than 80% Indian cities and towns. UltraTech's takeover of Century's cement business has improved its position in the high-growth eastern market. Additionally, a pan-India presence helps the company from downtrends in any single region. The company has been mainly focusing on reducing its leverage and till now it has reduced its net debt from Rs.6,717 crores in March 2021 to Rs. 3,901 crores as of March 2022. (Net Debt/EBITDA 0.32x and Net Debt/Equity- 0.08x). The management remains keenly focused on reducing its debt and has set an ambitious target to become net debt free by FY23. As of 31st March,2022 the market capitalisation of UltraTech stood at Rs. 1,90,589 crores, the highest in India’s cement industry. UltraTech’s capacity utilisation stood at 77% as of March’22 and 76% for Q2FY23. The company reinstated its capex plans and spent Rs. 5,540 crores in FY22. UltraTech’s total capacity is expected to reach 137 MTPA (current capacity at 119.95 MTPA) by FY23 with a long term plan to achieve 160 MTPA capacity by FY25. The new capacity expansion plans will boost UltraTech’s capacity in the central and east regions.

ACC Ltd

ACC Limited is a leading player in the Indian building materials space, with a pan-India operational and marketing presence. In 2006, global cement major Holcim, acquired management control of the Company. ACC became a member of the Adani group in 2022. Its cement capacity as of Q2C.Y.22 is 36 million tonnes per annum. The Company has 5 integrated cement manufacturing plants and 8 cement grinding units across the country. ACC enjoys a reputation of being one of the most efficient cement manufacturers in the world. Its environment protection measures are considered to be at par with the finest in the country. ACC Ltd was operating at the highest capacity utilisation of 85% as of Dec’20 due to high demand in rural and semi-urban areas but overall in CY21 it dropped to  78%. The company operates PAN India and has strong operational linkages in their plants and grinding units which helps them obtain better cost efficiency. Currently, ACC is expanding its capacity from 36 mtpa to 39.3 mtpa to strengthen its position in demand accretive central and eastern regions of India. The company reported a volume growth of 3% in cement sector in H1CY22 as compared to H1CY21. The company passed on some of its costs by increasing net selling price but it too felt the impact of rising material costs, power costs and freight costs as it reported a 43% drop in its EBITDA per ton for the half year 2022.

Ambuja Cements

Initially called Gujarat Ambuja Cements Ltd, Ambuja Cements Ltd is one of the major Indian cement producing companies. Ambuja Cements  was a part of global conglomerate Lafarge Holcim which acquired over 50% stake in the company. In 2022, Ambuja Cement also became a member of the Adani group. Ambuja has a total capacity of 30  MTPA and has 6 integrated cement manufacturing plants with 8 cement grinding units across the country. Ambuja was the first Indian cement manufacturer to build a captive port with three terminals along the country's western coastline and it enjoys a reputation of being one of the most efficient cement manufacturers in the world. The company also has its own fleet of ships for effective transportation of cement. Ambuja reported a 8% consolidated revenue growth in H1CY22 compared to H1CY21 driven by a strong growth in volume as well as higher realisations per ton. However, the EBITDA was impacted due to increase in fuel costs. The company has a ROCE of 22.1%, one of the best in the cement industry  The company has highest capacity in North and Central regions (40%) and as the demand in these regions continue to grow post-pandemic, Ambuja cements is likely to be at an advantageous position over its peers.

Key Risks & Conclusion of Cement Stocks

With the increase in the infrastructure spending allocation in the current financial budget, and the rise in the real estate momentum the demand for cement has increased. Rising energy and fuel costs remain to be key risk for the cement companies in the near-term. Furthermore, any delay in capacity expansion plans and fear of another wave of COVID-19 could pose a big risk on the cement companies.

Video on how to analyse and pick Best Cement Stocks in India for Investments

Model Portfolio:

In order to get an exposure to best Indian cement stocks, you would need a total of Rs. 50,059.15 for the below curated portfolio as of 9th August 2024.

A detailed table with various parameters for Best Cement Stocks to buy in India

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