Cement stocks such as Dalmia Bharat, Ramco Cements, ACC Ltd and UltraTech Cement are in focus today after the Tamil Nadu Government notified the levy of a mineral-bearing land tax of ₹160 per tonne on limestone in the State. The move would increase cement production costs, which analysts believe will hurt margins unless the cost is passed on to consumers.
According to Motilal Oswal, the impact on EBITDA/t would be highest for Ramco Cements (₹80), followed by Dalmia Bharat (₹34). The former has the highest clinker capacity in Tamil Nadu (52 per cent of its total clinker capacity), followed by Dalmia (23 per cent), UltaTech (4 per cent) and ACC (2 per cent).
Global brokerage Jefferies estimated ₹40-70 per tonne impact on Dalmia or Ramco Cements’ EBITDA. This move specific to Tamil Nadu as of now, may set a precedent for other States, it added.
Motilal Oswal emphasised that the South region is witnessing multiple headwinds over the last one year, including multi-year low cement prices, weak government spending and higher competitive intensity.
This development also weakens Ramco Cements and Dalmia’s competitive advantage over other industry players that source clinker from other clusters (such as Yerranguntla in Andhra Pradesh and Kutch in Gujarat via the sea route).
The brokerage is positive on companies that have a strong presence in the North, Central, and West regions.
UltraTech remains its top pick in the large-cap space and JK Cements in the mid-cap space.
JM Financial analysts expect an EBITDA impact of 9 per cent for Ramco and 3 per cent for Dalmia on FY27 estimates. They emphasised that the State-based cement players may have to hike prices by ₹8-10 per bag. However, it was observed that cement price have been on a downtrend in Tamil Nadu for a couple of years, owing to fight for market share. JM Financial also sees an increasing possibility of other mineral-bearing states imposing additional levies in future.
Meanwhile, Investec and Kotak Institutional Equities have maintained sell ratings on Ramco Cements at revised target prices of ₹725 and ₹570, respectively.
Shares of Ramco Cements traded 1.13 per cent lower on the NSE at ₹810.80 as at 10.36 am, and Dalmia Bharat slipped 0.65 per cent to ₹1,630.40. These stocks fell 7 per cent and 5 per cent, respectively on Wednesday.
UltraTech Cement traded flat at ₹10,494.65 on the NSE and ACC Ltd at ₹1,858.70 at the time of writing.
