UltraTech Cement, ACC, Ambuja Cements and Dalmia Bharat gained in the range of 5 per cent to 10 per cent on the BSE. In comparison, the S&P BSE Sensex was down 1 per cent during the same period.
The government’s firm commitment to revive the economy and the thrust on infrastructure spending augurs well for the growth of cement demand. The heavy rains in the country should also prove beneficial for kharif crop, which should again help revive rural demand.
Market analyst expect fortunes of the cement industry to take a favourable turn, led by demand revival, surging cement prices, industry consolidation and benign raw material prices.
Demand had taken a severe beating during H1FY20 due to several headwinds, despite which industry EBITDA/tn jumped around 41 per cent year-on-year driven by stable cement prices and improving cost efficiencies.
“Currently, most cement players are trading at around -1-standard deviation from their average 5 year EV/EBITDA levels and hence present an attractive buying opportunity. Going forward, we expect significant profitability gains to be driven by demand recovery, higher utilisation and sustained cement prices,” analysts at Edelweiss Broking said in industry update.
Motilal Oswal Securities expect five key trends to emerge in CY2020 for cement sector, such as recovery in volume growth to 6 per cent backed by pick-up in spends on infrastructure development (roads, irrigation, metros, etc.), limited clinker expansion, which should help clinker utilization rise to 79 per cent, front-ended price hikes after continuous decline in the past six months, benign costs in 1H on lower petcoke prices, and further sector consolidation (Emami, Murli, Vadraj), which should support prices.