SYNOPSIS: Rising energy costs are pressuring cement sector margins, leading to EBITDA downgrades and target cuts by Jefferies, though select stocks retain positive ratings amid expectations of a gradual pricing-led recovery.
Brokerages have highlighted rising cost pressures in the cement sector, largely driven by higher energy prices amid ongoing tensions in West Asia. While the overall outlook remains constructive for select companies, there is a clear preference for a recovery led by pricing. According to Jefferies, elevated energy costs pose a significant risk to earnings, as such cost increases are typically difficult to pass on immediately to customers.
The brokerage has estimated a variable cost increase of around Rs. 300 per tonne between Q4 FY26 and Q2 FY27. Although some pricing actions have been taken, they are expected to offset only a part of the cost escalation. As a result, Jefferies has lowered its Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) estimates for these companies by 4 to 9 percent for FY27-FY28.
Among the sector players, Ambuja Cements Limited is expected to see the most significant earnings downgrade, primarily due to a slower pace of cost normalisation, which remains a key factor for improving investor sentiment.
Despite these near-term pressures, Jefferies continues to maintain a “buy” rating on UltraTech Cement Limited, Ambuja Cements Limited, JK Cement Limited, and Dalmia Bharat Limited, while retaining a “hold” rating on Shree Cement Limited. However, it has cut down its price targets across all these stocks.
During Thursday’s trading session, the stock closed in the green at Rs. 5,504.8 on BSE, with the market capitalisation of Rs. 42,525.4 crores. Jefferies has trimmed its target price by more than 4 percent to Rs. 6,705 from Rs. 7,000 per share, indicating an expected upside of over 23 percent from the previous closing price of Rs. 5,431.05.
Dalmia Bharat Limited
During Thursday’s trading session, the stock closed in the red at Rs. 1,970.1 on BSE, with the market capitalisation of Rs. 36,952 crores. The target price has been cut by about 4 percent to Rs. 2,500 from Rs. 2,600, suggesting an upside potential of up to around 27 percent from the previous closing price of Rs. 1,973.5.
UltraTech Cement Limited
During Thursday’s trading session, the stock closed in the green at Rs. 11,828.2 on BSE, with the market capitalisation of Rs. 3.48 lakh crores. Jefferies has reduced its target price by around 5 percent to Rs. 14,025 per share from Rs. 14,750. This indicates a potential upside of more than 19 percent from its previous closing price of Rs. 11,769.75.
Shree Cement Limited
During Thursday’s trading session, the stock closed in the green at Rs. 25,115 on BSE, with the market capitalisation of Rs. 90,616.8 crores. The brokerage has lowered its target price by more than 8 percent to Rs. 27,530 from Rs. 30,000, indicating a potential upside of over 10 percent from its previous closing price of Rs. 24,960.6.
Ambuja Cement Limited
During Thursday’s trading session, the stock closed in the green at Rs. 458.65 on BSE, with the market capitalisation of Rs. 1.13 lakh crores. The target price has been revised downward by over 16 percent to Rs. 615 from Rs. 735 per share, implying an upside potential of more than 35 percent from its previous closing price of Rs. 453.95.
Closing Thoughts
The cement sector is currently facing margin pressures due to elevated input costs, particularly energy. While near-term earnings visibility remains impacted, pricing actions and demand stability could support a gradual recovery. Jefferies maintains a selective positive stance on fundamentally strong players, suggesting that despite current challenges, the sector’s medium-term outlook remains stable, subject to cost normalisation and pricing discipline.
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