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Deutsche Bank has raised earnings per share estimates for cement companies under its coverage by 3-14% on assumption of better all-India pricing growth.
The bank said Indian cement prices have been strong having gained 10% so far this year as industry cost leaders have lowered the competitive intensity and attempted to improve profitability after a weak calendar year 2018.
Deutsche has raised its all-India pricing growth assumption by 6% year-on-year for the ongoing financial year from 4%, and has estimated that more upgrades are likely on the Street as improving realization trends are factored in.
Deutsche Bank has retained its buy call on ACC and raised target price to Rs 1,830 from Rs 1,790, and lifted target price to Rs 21,600 from Rs 19,330 on Shree Cement.
The bank has raised target price on Ambuja Cement to Rs 235 from Rs 230 and increased UltraTech Cement target price to Rs 4,575 from Rs 4,240.
Deutsche has raised target price on Ramco Cements to Rs 790 from Rs 785.
Shares of these companies ended mixed in a subdued market on Tuesday.
Shree Cement, UltraTech and Ramco ended down 0.2-0.6%, that of ACC and Ambuja ended up 0.3% and 0.1% respectively.
While the bank has buy ratings on all these companies, ACC and Shree Cement are its top picks in the cement space.
However, Deutsche sees demand growth moderating and believes monsoon will hold the key for recovery in demand.
"Demand growth across most parts of the country has eased from the heightened double-digit levels seen in CY18, with channel members indicating demand has tapered to around 6-7% in recent months and is likely to be below 5% in April.
They indicated a combination of election activity and low water tables have impacted volumes," said Deutsche.
The India Meteorological Department has predicted a near normal monsoon this year at 96% of long period average while private forecaster has estimated that monsoon will be below normal at 93%.
