With rising acquisition interest, cement industry is now a seller’s market: Centrum Broking

Cement market dynamics have shifted from being a buyers’ market to a seller’s market, according to Mangesh Bhadang, Senior VP-Research at Centrum Broking. This change is driven by several companies in the sector looking for acquisition opportunities. Bhadang believes that even smaller companies are striving for growth.

In recent developments, the Adani Group acquired Penna Cement for an enterprise value of ₹10,422 crore, using internal accruals. This move is seen as strategic for the group’s growth and will strengthen Ambuja’s presence in the South Indian market. Additionally, UltraTech Cement acquired a 23% stake in India Cements.

Bhadang favors Ambuja Cement over UltraTech Cement and Shree Cement in the largecap space. In the smallcap segment, he recommends Birla Corp and Nuvoco. However, he currently does not see any attractive buying opportunities in the midcap space.

The quarterly earnings of cement companies for April-June 2024 could be affected by weak realizations, with prices expected to remain low in the July-September 2024 quarter as well. Bhadang anticipates an earnings recovery from the third quarter onwards as sector demand improves.

Cement pricing has been on a downward trend for the past nine months, with companies facing challenges in raising prices due to market competition and increased capacity. Bhadang expects pricing to remain weak in the near term, with a potential increase in the third quarter.

Overall, the cement sector is experiencing changes in market dynamics, with companies focusing on growth through acquisitions and strategic investments.