Top Cement Stocks to Buy in 2024: Spotlight on Bihar and Andhra Pradesh
Contents
Cement market trends 2024
Top Cement Stocks to Buy in 2024: Spotlight on Bihar and Andhra Pradesh
Union Budget 2024 has provided a fresh perspective on India’s infrastructure development, particularly focusing on housing and road projects. The cement industry, a backbone of infrastructure, is set to benefit from these allocations. This article delves into the specifics of the budget, its impact on cement demand, and highlights key players poised to gain from these developments.
Union Budget 2024 and Cement Demand
Key Highlights of Budget 2024
 Housing Capex
The Union Budget 2024 has marginally boosted cement demand through higher housing capital expenditure (capex). The increased allocation to housing, particularly in urban areas, is expected to add approximately 10 million tonnes (MT) of cement volumes.
Road Capex Composition
The composition of road capex has also shifted, with a significant focus on projects in the Eastern and Southern regions of India. This shift is poised to benefit cement companies operating in these areas.
 Impact on Cement Demand
Increase in Housing Allocation
The government’s increased allocation to housing is projected to enhance cement demand significantly. The focus on urban housing under schemes like PMAY-Urban, supported by a Rs 4000 crore Credit-Linked Subsidy Scheme (CLSS), is a testament to this.
Focus on East and South Regions
The budget’s emphasis on developing Eastern states, especially Bihar, and Southern states like Andhra Pradesh, will drive cement demand. Nomura India estimates an additional 4MT of cement volumes from road projects alone in these regions.
Regional Focus: Bihar and Andhra Pradesh
Development Initiatives in Bihar
Key Projects
The government has announced Rs 26,000 crore worth of road connectivity projects in Bihar, including the Patna-Purnea Expressway and the Buxar-Bhagalpur Expressway. These projects are expected to spur cement demand in the state.
Expected Cement Demand
The focus on Bihar’s infrastructure is anticipated to generate significant cement volumes, estimated to be around 4MT from road projects alone.
Development Initiatives in Andhra Pradesh
Key Projects
Under the Andhra Pradesh Reorganization Act, the government has allocated Rs 15,000 crore for the development of the region. Key projects include various expressways and connectivity enhancements.
Expected Cement Demand
The development projects in Andhra Pradesh are expected to drive cement demand significantly, benefiting local cement manufacturers like Ultratech and Ramco.
Leading Cement Companies in the Spotlight
Ultratech Cement Ltd
Market Share in Bihar and Eastern India
Ultratech Cement Ltd has the highest volume share in both Bihar and Eastern India markets. Its extensive market presence positions it well to capitalize on the increased demand.
Installed Capacity in Andhra Pradesh
Ultratech also boasts the highest installed capacity share in Andhra Pradesh and the Southern region, making it a key player to watch as infrastructure projects progress.
Ambuja Cements and Nuvoco Vistas
Market Position and Strategy
Ambuja Cements, consolidated under Adani Cement, and Nuvoco Vistas Corporation Ltd follow Ultratech in market share. Their strategic positions in these regions will enable them to benefit from the increased capex spend.
Ramco Cement
Presence in Southern Region
Ramco Cement has a strong presence in the Southern region, particularly Andhra Pradesh. The increased infrastructure spend in this area is expected to benefit Ramco significantly.
Government Allocations and Infrastructure Projects
PMAY-Rural and MNREGA
 Unchanged Allocations
Despite the unchanged allocations for PMAY-Rural and MNREGA from the interim budget, the focus remains on enhancing rural infrastructure, indirectly supporting cement demand.
Road Connectivity Projects
Patna-Purnea Expressway
The Patna-Purnea Expressway is one of the key projects announced for Bihar, expected to drive significant cement demand.
Buxar-Bhagalpur Expressway
Similarly, the Buxar-Bhagalpur Expressway will contribute to the increased cement volumes in the region.
Expected Cement Volume Growth
Incremental Cement Volumes
26,000 Crore Road Connectivity Project
Nomura India estimates around 4MT incremental cement volumes from the Rs 26,000 crore road connectivity projects in Bihar alone.
Projected Demand from Government Capex
Cement Intensity Estimates
Based on estimated cement intensity and a stable cement price scenario, a 29% and 9% increase in cement demand from government capex and welfare programs is projected for FY25 compared to FY24.
Market Outlook and Predictions
Volume Growth Expectations
Post-Election Year Projections
Nomura India projects an 8% overall volume growth expectation in a post-election year, with a modeled 5.1% year-on-year (YoY) volume growth in FY25.
 Long-term Tailwinds
Operating Costs and Pricing Environment
The cement sector is expected to benefit from long-term tailwinds such as higher volume growth, lower operating costs due to moderating fuel costs, and a better pricing environment resulting from industry consolidation.
Investment Recommendations by Nomura India
Preferred Stocks
Ambuja Cements
Nomura India recommends a ‘Buy’ on Ambuja Cements, highlighting its strong market position and growth potential.
Shree Cement
Shree Cement is also preferred for its robust performance and market strategy.
Ultratech Cement
Ultratech Cement’s extensive market presence and capacity make it a top recommendation.
Ramco Cement
Ramco Cement is recommended for its strong foothold in the Southern region.
Nuvoco Vistas
Nuvoco Vistas is another top pick due to its strategic market positioning.
Stocks with Reduced Recommendations
ACC
Nomura India maintains a ‘Reduce’ recommendation on ACC, citing less favorable market conditions.
Dalmia Bharat
Dalmia Bharat also receives a ‘Reduce’ recommendation due to its market position and growth prospects.
Conclusion
The Union Budget 2024, with its focus on housing and infrastructure, particularly in Bihar and Andhra Pradesh, is set to boost cement demand. Key players like Ultratech, Ambuja, Ramco, and Nuvoco are well-positioned to benefit from these developments. Despite some unchanged allocations, the overall outlook for the cement industry remains positive, driven by long-term growth prospects and favorable market conditions.
FAQs
What is the significance of the Union Budget 2024 for the cement industry?
The Union Budget 2024 is significant for the cement industry as it increases allocations for housing and road projects, particularly in Bihar and Andhra Pradesh, boosting cement demand.
Which regions are expected to see increased cement demand?
Bihar and Andhra Pradesh are expected to see increased cement demand due to the focus on infrastructure development in these regions.
Why are Ultratech and Ramco Cement highlighted in the report?
Ultratech and Ramco Cement are highlighted due to their high installed capacity shares in Andhra Pradesh and the Southern region, positioning them well to benefit from increased infrastructure spending.
How will the unchanged allocation to PMAY-Rural and MNREGA affect cement demand?
The unchanged allocation to PMAY-Rural and MNREGA indicates a continued focus on rural infrastructure, which indirectly supports cement demand.
What are the long-term growth prospects for the cement industry?
The long-term growth prospects for the cement industry are positive, driven by higher volume growth, lower operating costs, and a better pricing environment resulting from industry consolidation.
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