Nirmal Bang upgrades UltraTech, Star Cement to a buy; here’s what the brokerage firm says

Brokerage firm Nirmal Bang Equities has recently upgraded two cement stocks - UltraTech Cement and Star Cement - to 'buy', expressing faith in their growth potential and takin note of their current valuation.

UltraTech Cement share price has gained about 3 per cent over the last year (till February 28 close). Shares of this the Aditya Birla Group's flagship cement company hit its 52-week high of ₹12,143.90 on December 16 after hitting a 52-week low of ₹9,250.10 on April 19 last year.

On the other hand, Star Cement share price has declined 2 per cent over the last year. The stock hit a 52-week high of ₹255.95 on May 22 and a 52-week low of ₹171.55 on November 21 last year.

UltraTech Cement | Previous close: ₹10,114 | Target price: ₹12,734 | Upside potential: 26%

Nirmal Bang upgraded UltraTech Cement stock to a 'buy’, valuing it at 16.5 times December 26E EV/EBIDTA, setting a target price of ₹12,734.

The brokerage firm pointed out that UltraTech Cement will set up a wires and cables plant in Bharuch, Gujarat, with a capex of ₹1800 crore over the next two years. The plant is expected to be commissioned by December 2026.

The brokerage firm believes raw materials like copper and aluminium account for 70-76 per cent of the total cost in the cable and wires sector. UltraTech Cement has an advantage of having a direct access to Hindalco and Birla Copper for these raw materials.

"UltraTech Cement, with direct access to Hindalco and Birla Copper (both of which are part of the Aditya Birla Group), will have an assured supply and cost advantage, allowing it to price its products competitively without significantly reducing margins," said Nirmal Bang.

Star Cement | Previous close: ₹202.15 | Target price: ₹241 | Upside potential: 19%

Nirmal Bang upgraded Star Cement stock to a buy after hosting the company's management at the NBIE Virtual Investor Conference to gain insights into the current business outlook.

The brokerage firm pointed out that demand in the Northeast market has been relatively stable in 4QFY25. Overall, the industry, however, experienced slow growth in FY25.

"For FY25, Star has projected a volume growth of 6-7 per cent YoY, consistent with industry growth throughout the year. However, it anticipates a more robust growth rate of 13-14 per cent in FY26. Despite current challenges, these data indicate confidence for the coming years," Nirmal Bang said.

The brokerage firm added that pricing patterns in the Northeast have remained constant, with no significant decreases anticipated in the near future. However, prices have declined outside the Northeast, particularly in West Bengal and Bihar, during 3QFY25.

Despite this, the management expects prices to stabilise or climb somewhat, indicating confidence in price recovery, Nirmal Bang said.

"The company is expected to achieve an EBITDA of ₹260 crore, surpassing the guidance of ₹220-230 crore, driven by increased volumes and improved realization/T during 4QFY25," said Nirmal Bang.

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