Comments
A majority of the cement stocks including Ambuja Cements,Ultratech Cement, Shree Cement, JK Cement, Kesoram Industries, Dalmia Bharat, and ACC have been trading positive in the domestic market.
In Wednesday’s trade, these stocks rose by 1-5 per cent. Over the week, they gained 10-20 per cent.
Brokerages Motilal Oswal and Emkay Global have maintained their positive stance on the sector, while Nuvama has reiterated a neutral call.
Motilal Oswal pointed out that the all-India average cement price has increased 3 per cent month-on-month in June 2024. “Considering the cement price hike, the all-India average cement price is estimated to be flat q-o-q [quarter-on-quarter] in 1QFY25 (QTD). Within regions, cement prices in 1QFY25 (QTD) are likely to be up in the western/central regions by 3 per cent/1 per cent q-o-q. Conversely, cement prices are estimated to be down in the northern, eastern, and southern regions in the range of 1-2 per cent,” its report said
Demand in near term
The brokerages estimate cement demand to be subdued or bleak in the near term due to the onset of monsoons in the next few weeks across markets. However, it is believed to rebound strongly in 2HFY25, aided by the new government’s focus on affordable housing, continuing strong demand from real estate, and likely pick-up in industrial capex.
Motilal pointed to the BJP’s 2024 manifesto, which emphasised focus on expanding PM Awas Yojana, slum redevelopment, promoting affordable housing, expanding road network, rail and metro connectivity, and constructing new airports. “We believe the announcements under the forthcoming Budget will be the key monitorables for improvement in the cement demand momentum,” it added.
Emkay Global noted that the cement sector, on average, is trading at a 10 per cent premium to its historical five-year average. The brokerage stated, “The cement industry has been on an uptrend with healthy volume CAGR of 9-10 per cent over FY21-24 (against historical average of 5-6 per cent). Demand may soften in H1FY25; however, we expect steady 7-8 per cent demand CAGR over the next few years.“ It added that cement prices are currently at a three-year low.
However, analysts of Nuvama noted that May 2024 began on a positive note (after muted growth in April) with announcements of price hikes across regions, though a rollback through the month erased most of the gains.
The rollback was mainly a result of poor demand on account of the general elections (which impacted availability of labour) and the heatwave sweeping through vast swathes of the country. “With cement players undertaking cost efficiency measures and fuel prices benign (lag effect), there is likely to be relief on the cost front going ahead, which might soften the adverse impact of muted realisations,” Nuvama added.
Top picks by brokerages
Shares of Ultratech Cement — which featured among top picks of brokerages such as Motilal, Emkay and Anand Rathi — hit a 52-week high on the NSE at ₹11,038.55 on June 12.
Anand Rathi, in a report published earlier this month, mentioned Birla Corporation as its top pick, along with Shree Cement and Ultratech in the large-cap space.
Ambuja Cements also featured among Emkay’s top picks. In the mid-cap space, Motilal Oswal backed Dalmia Bharat and JK Cement stocks.
In addition, JK Cements remained Nuvama’s top pick in the space.
Comments
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.