CLSA’s cement sector picks with up to 27% upside

The brokerage has a different view on Ramco Cements, where it expects industry growth and capacity additions to remain comparatively weaker.

CLSA’s top cement sector bets

The CLSA report, dated August 25, 2026, says cement demand has held up despite the seasonally weak period. Its channel checks indicate 6-8% growth across most regions, helped by below-normal rainfall and continued construction activity. Pricing has also remained largely stable in most regions.

CLSA expects the second quarter to face pressure from higher fuel costs, weaker volumes and negative operating leverage. However, the brokerage expects profitability to improve in the second half as competitive intensity eases and fuel costs remain benign.

For its preferred stocks, CLSA is focusing on companies where capacity additions, volume growth, cost performance and profitability provide stronger earnings visibility. The brokerage’s top picks are UltraTech Cement, Shree Cement and Dalmia Bharat.

CLSA on Shree Cement: ‘Outperform’

CLSA has retained its ‘Outperform’ rating on Shree Cement and raised its target price from Rs 29,000 to Rs 30,500. The potential upside is about 26.6%. CLSA said it now values the company on a consolidated basis instead of standalone earnings because part of its expansion is taking place through subsidiaries.

The brokerage expects Shree Cements to grow faster than the industry, supported by its capacity addition pipeline. It also expects premiumisation efforts to support profitability, although geographical concentration remains a factor in its assessment of the company.

CLSA cut its FY27-FY29 EBITDA estimates for Shree Cement by 4%-9% to account for higher costs. Even after these cuts, the brokerage expects organic EBITDA growth to remain broadly in line with larger cement companies.

The brokerage said visibility on volume growth, benefits from premiumisation and better cement pricing will be important factors for the stock. It also sees a favourable risk-reward profile if the profitability environment improves.

“Our target price is based on 16.0x FY28CL EV/Ebitda, largely in line with large-cap peers like UltraTech and Ambuja,” CLSA said.

CLSA on Dalmia Bharat: ‘Outperform’

CLSA has retained its ‘Outperform’ rating on Dalmia Bharat Ltd. and a target price of Rs 2,250. The potential upside is about 21.9%. The brokerage sees Dalmia as an attractive opportunity, supported by its capacity expansion plans and focus on cost leadership.

Dalmia Bharat is targeting cement capacity of 110-130 million tonnes by 2030, according to CLSA. The brokerage expects this expansion to support industry-leading volume growth, while the company’s plans to divest non-core assets could help address balance-sheet concerns.

CLSA said better-than-industry volume growth, commissioning of new capacity and concrete timelines for the next phase of expansion are important catalysts. It also said geographical diversification will be an important factor to watch.

The brokerage values Dalmia Bharat at 11 times FY28 estimated EV/EBITDA, a slight discount to large-cap peers. CLSA said the announced capacity expansion should drive volume growth, although costs could increase as new capacity is commissioned.

“We like the company’s strong growth focus and cost leadership,” CLSA said.

CLSA on UltraTech Cement: ‘High-Conviction Outperform’

CLSA has a ‘High-Conviction Outperform’ rating on UltraTech Cement Ltd. with a target price of Rs 14,000. The potential upside is about 21.3%. The brokerage sees UltraTech as its preferred large-cap cement company because of its capacity expansion plans, market position and regional presence.

CLSA expects UltraTech’s strong capacity addition pipeline to support industry-leading growth. Higher cement prices and cost benefits are expected to support profitability, while additional renewable capacity is also expected to help the company’s profitability.

The brokerage said a sharper improvement in profitability from the full impact of cost savings and better spreads could provide an additional catalyst. It also expects return on capital employed to improve through low-cost organic expansion and higher utilisation.

CLSA values UltraTech at 17 times FY28 estimated EV/EBITDA. It said the company’s market leadership, growth visibility and diversified regional presence support its valuation. The brokerage also said UltraTech is best positioned among the large-cap cement companies.

“We believe UltraTech is best positioned among the large-cap cement companies,” CLSA said.

CLSA on Ramco Cements: ‘Underperform’

CLSA has an ‘Underperform’ rating on The Ramco Cements and reduced its target price from Rs 755 to Rs 750. The potential downside is about 17.1%. The brokerage said Ramco’s volume growth is likely to lag industry peers because of lower capacity additions and its concentrated presence.

CLSA said an improvement in industry spreads would still benefit Ramco. It also identified higher utilisation and growth ahead of the industry as conditions that could support a better view on the company.

The brokerage values Ramco Cements at 11 times FY28 estimated EV/EBITDA, applying a discount to large-cap peers because of geographical concentration and limited visibility on growth. Capacity commissioning, lower costs and debt reduction are important factors in its assessment.

CLSA said weaker demand, pricing pressure, higher energy costs and delays in capacity additions are key risks. Faster deleveraging through the sale of non-core assets, along with better demand, pricing and energy costs, could provide positive factors.

“We believe Ramco’s volume growth will lag industry peers given lower capacity addition concentrated presence,” CLSA said.

Cement stocks: CLSA target prices and recalculated upside

Source: CLSA’s India cement report.

What CLSA sees for the cement sector

CLSA’s channel checks show cement demand growing 6%-8% in most regions during the current period. Eastern India has been weaker because of heavy rainfall, while independent home-builder demand has remained steady. Cement prices have also largely held at 1Q exit levels, apart from a decline of Rs 10-12 per bag in the east.

The brokerage said industry demand grew 7%-8% year-on-year in the first quarter. Central and western India recorded the strongest growth, followed by the north, while West Bengal, Tamil Nadu and Kerala lagged because of elections and labour disruptions.

CLSA expects second-quarter profitability to face pressure as higher fuel costs are combined with weaker volumes. The brokerage expects EBITDA per tonne to decline in the quarter because of negative operating leverage, before a sharp recovery in the second half if fuel costs remain benign and competition eases.

The report said the MMDR Amendment Bill could be positive for companies with greater exposure to states where additional mineral-related charges had previously affected profitability.

“Demand remains resilient during the current seasonally weak period,” CLSA said.

Conclusion

CLSA’s cement stock picks are led by Shree Cement, Dalmia Bharat and UltraTech Cement, with the brokerage seeing the strongest potential in companies with better earnings visibility and capacity-led volume growth. 

Shree has the highest recalculated upside among 

Disclaimer: This article is based solely on the CLSA India cement sector report. The ratings, target prices, estimates and views mentioned are those of CLSA. This article is for informational purposes only and should not be treated as investment advice. Investors should conduct their own assessment and consider their financial circumstances before making any investment decision. Investments are subject to market risks, and the value of investments can go up or down.