Bihar & Andhra Pradesh Get Infrastructure Boost: Cement Stocks in These Regions Poised to Surge

Increased Infrastructure Spending in Bihar and Andhra Pradesh to Boost Demand of Cement Stocks

While the overall infrastructure budget for the coming fiscal year remained unchanged, analysts at Nomura India believe a shift in focus towards the East and South will benefit cement companies in those regions.

Eastern Focus

The budget allocated ₹26,000 crore for road development projects in Bihar, including expressways and bridges. This is expected to generate an additional 4 million tonnes of cement demand. Companies like Ultratech, Ambuja, and Nuvoco have a strong presence in Bihar and are likely to benefit significantly.

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Andhra Pradesh Boost

Increased government spending in Andhra Pradesh, driven by the ₹15,000 crore allocation, is also expected to raise cement demand. Ultratech and Ramco have a large production capacity in the South and are well-positioned to capitalize on this growth.

Overall Growth Expected

Nomura India predicts a 29% increase in cement demand from government projects compared to the previous year. This, combined with an 8% rise in PMAY-Urban allocation, supports the industry’s overall volume growth expectations.

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Analyst Recommendations

Despite a slight premium valuation for the sector, Nomura India remains positive due to long-term factors like rising demand, lower fuel costs, and consolidation leading to better pricing. They recommend buying Ambuja Cements, Shree Cement, Ultratech Cement, Ramco Cement, and Nuvoco Vistas. Conversely, they advise reducing holdings in ACC and Dalmia Bharat.