The domestic brokerage says BJP's manifesto lays a lot of emphasis on infrastructure, which if implemented will lead to higher cement utilization in the state.
The Gujarat factor:
The Ahmedabad metro rail, 5 million new houses (against 2.2 million new houses in the last five years), irrigation and port projects and 10-laning of roads are some of the infrastructure projects listed in the BJP's manifesto, Mihir Jhaveri, vice president (institutional research) at Religare Capital Markets, told NDTV Profit.
Gujarat accounts for 8 per cent of all India cement demand and 35-40 per cent of cement demand in Western India. The region will touch 92 per cent utilization level by FY15, Mr Jhaveri said.
Religare says Ultra Tech, Ambuja Cements and JK Cement, which have a strong presence in Gujarat, are likely to gain the most from a BJP win.
"These companies will have superior pricing power... their stocks have moved up and there is scope of further upgrades," Mr Jhaveri said.
Cement stocks traded lower tracking broader market weakness today. At 11.40 a.m., UltraTech Cement was down 0.2 per cent to Rs 2,012, while Ambuja Cements traded 2 per cent lower at Rs 206.75.
Cement sector poised for a turnaround:
The cement industry will witness a sharp recovery in prices in FY14 on improving supply-demand dynamics and government action to fast track infrastructure projects, analysts say. Deutsche Bank believes companies such as UltraTech Cement and Shree Cement which have the potential to increase capacity and have a bigger presence in western and northern India will witness "disproportionate benefits".
Bank of America Merrill Lynch upgraded UltraTech Cement and India Cements to 'buy' from 'underperform' last week. Morgan Stanley maintains an 'attractive' view on the sector, and recommends investors buy cement stocks on weaknesses on expectations of easing capacity addition and a pickup in cement demand in a report dated Friday.
Reuters reported today that French cement maker Lafarge SA is in talks with private equity and financial firms to raise about $300 million (nearly Rs 1,650 crore) by selling around a 20-25 per cent stake in its India unit. The world's largest cement maker is also weighing an option to exit India entirely should it get a strategic investor to buy out its operations in the country.
There are also reports that UltraTech may buy Jaypee's unit in Gujarat for $160-$165 million (over Rs 800 crore). Jaypee has 5 million tonne capacity in Gujarat.
(With inputs from Reuters)