Best cement stocks in India for 2023

Cement stocks have a close correlation with a country’s investments in the infrastructure sector, and India plans to boost this spending even further. Sample this: India plans to spend a whopping $1.4 trillion, or more than Rs 100 lakh crore, on infrastructure under the National Infrastructure Pipeline in the next five years. The cement industry, of course, will benefit hugely from this massive investment.

Also, let’s not forget India’s real estate story, which is back on the high growth path after bumps from demonetisation and then COVID-19. Real estate is the biggest buyer of cement and hence greatly influences cement stocks.

Cement stocks offer one of the best mediums to take part in India’s infrastructure and real estate story.

Opportunities in Cement Stocks

India is the second-largest cement manufacturer in the world, accounting for around 7% of the global installed capacity. India produced around 390 million tonne of cement in FY23, a growth of 8-9%, according to different reports. Most research houses expect the growth rate to rise further to touch double digits in FY24. As many cement companies in India got listed on stock exchanges over the past few decades, they offer retail investor a direct chance to be part of this stellar growth opportunity.

Foreign direct investment in the cement industry hit $5.48 billion between April 2000 and June 2022. All this bodes well for the companies in the sector.

Top Cement Stocks of India 2023

Nearly two dozen cement companies are listed on stock exchanges in India. Here’s a quick peek into some of the best-known cement stocks.

UltraTech Cement Ltd

Ultratech is India’s biggest cement manufacturer by market share (more than 20%) and also has the highest market capitalisation among cement companies in India. UltraTech is the flagship cement company of the Aditya Birla Group and a subsidiary of Grasim. It is the only non-Chinese company in the world to have a capacity of over 100 million tonne in a single country.

The consolidated revenues of UltraTech Cement grew from Rs 41,608 crore in FY19 to Rs 63,239 crore in FY23, while its net profit grew from Rs 2,399 crore to Rs 5,069 crore during the same period.

The share price has more than doubled in the last five years from around Rs 4,000 to Rs 8,400.

Ambuja Cements Ltd

Bought by the Adani Group in 2022, Ambuja Cements is one of the leading manufacturers of cement in India with a market share of around 6%. The company has a cement capacity of 31 million tonnes with six plants and eight grinding units across India.

The consolidated revenues of Ambuja Cements grew from Rs 27,103 crore in FY19 to Rs 38,937 crore in FY23, while its net profit grew from Rs 2,763 crore to Rs 2,996 crore during the same period. The net profit and topline figures may not be comparable as the company changed its financial year from April-March to January-December during the period.

The share price of Ambuja Cements has more than doubled in the last five years to around Rs 210 to Rs 434. The prices currently are down from a peak of Rs 580 hit in December 2022.

Shree Cement Ltd

The company was set up in 1979 and has then since grown into the top three cement manufacturer of India with a capacity of 47.4 million tonnes, including overseas plants, and also has a power generation capacity of 752 MW. Shree Cement has four plants in India and one in UAE. It commands a market share of around 7% in India.

The consolidated revenues of Shree Cement grew from Rs 12,554 crore in FY19 to Rs 17,852 crore in FY23, while its net profit grew from Rs 1,105 crore to Rs 1,269 crore during the same period.

The share price of Shree Cements has grown from around Rs 16,500 to around Rs 24,000 in the last five years.

ACC Ltd

ACC, formerly known as Associated Cement Companies Ltd, was one of the two companies Adani Group bought from Holcim in 2022 along with Ambuja. It is one of the oldest cement companies of India, whose products have been used even in Bhakra Nangal Dam. It has a market share of around 6% in the Indian cement market and runs 17 plants. Its installed capacity is around 34 million tonnes.

The consolidated revenues of ACC grew from Rs 15,657 crore in FY19 to Rs 22,210 crore in FY23, while its net profit changed from Rs 1,363 crore to Rs 869 crore during the same period. The earnings are not strictly comparable as the financial year of the company was changed during the period.

The share price of ACC has grown from around Rs 1,300 to around Rs 1,800 in the last five years after hitting Rs 2,600 in December 2022.

Dalmia Bharat Ltd

The company has been in the business of cement manufacturing since 1939 and its current capacity currently stands at 41.1 million tonnes. Dalmia Bharat is the largest producer of slag and specialty cement in India and has a market share of around 5.5% in India.

The consolidated revenues of Dalmia Bharat grew from Rs 9,484 crore in FY19 to Rs 13,540 crore in FY23, while its net profit moved from Rs 349 crore to Rs 529 crore during the same period.

The share price of Dalmia Bharat has doubled in the last five years from around Rs 1,100 to around Rs 2,200 in the last five years.

JK Cement Ltd

Jk Cement is more than a four-decade old company with installed grey cement capacity of 20 million tonnes and has overseas presence through JK Cement Works Fujairah FZC and JK White Cement (Africa) Ltd.

The company’s consolidated revenues grew from Rs 5,258 crore in FY19 to Rs 9,720 crore in FY23, while its net profit moved from Rs 263 crore to Rs 419 crore during the same period.

JK Cement share price has risen from Rs 839 to Rs 3,300 in the last years, making it one of top performing companies on the Dalal Street.

Factors to consider before investing in cement stocks

Market diversification – In India, disparity in regional growth can mean a spoke in the wheel for a cement company that concentrates on only one sector. Of course, it can be other way around also and the region with strong presence is doing well. It is important for a cement company to have larger presence in India and may be even abroad.

Mining rights – A greater access to limestone quarry helps a cement company cut cost and increase production without being dependent on others for supply of raw material.

Consolidation – Cement companies in India are going through a phase of consolidation. A better company would be one with deep pockets to ward off threats of acquisition and have power to buy new plants.

Financials – An investor should do a deep study of finances of the company, its debt levels, its revenue and profit performance over the past few years, before deciding to invest.

Valuation – A cement company that is valued less than peers despite good operations may present a good opportunity to invest.

Conclusion

Cement stocks present an opportunity to be a part of India’s infrastructure play as these stocks are set to do well with Indian economy on a strong footing and government focus on improving real estate, roads, ports and construction sectors. It is important to research stocks individually before any decision to invest and understand their technical metrics and fundamentals.