Analysts bullish on cement stocks on sustained demand, price hikes

Analysts note that cement manufacturers may have to hike prices further to ensure sustainability of margins amid rising cost pressures.

The government’s push on infrastructure along with sustained demand courtesy affordable housing has turned analysts bullish on the cement sector. Besides, expectations of further price hikes, to ensure sustainability of the current hikes, further alleviate their concerns on sustenance of margins amid rising cost pressures.

Factoring-in an above-average demand growth of 9 per cent CAGR over financial year 2021-23, coupled with and limited new supply (4.6 per cent CAGR), analysts at global brokerage Morgan Stanley have raised their FY23 earnings estimates by up to 13 per cent, driven by better realization/margin assumptions.

“Valuation (on EV/EBITDA) is not cheap, but with