Cement stocks in focus: UltraTech, ACC up over 3% on likely demand pick-up

Shares of cement manufacturers were in demand, gaining up to 8 per cent on the BSE on Thursday, on expectations that the government's recent push towards infrastructure creation will lead to price hike on the back of increased demand.

UltraTech Cement, Ambuja Cements, ACC, Orient Cement, Star Cement, India Cements, JK Lakshmi Cement, Prism Johnson, Heidelberg Cement India, Ramco Cements, Shree Cement, and Dalmia Bharat from the S&P BSE 500 index were up more than 3 per cent each. In comparison, the S&P BSE Sensex was up 0.36 per cent at 41,455 points at 10:50 am.

The government, recently, introduced a detailed roadmap for a Rs 100-trillion National Infrastructure Pipeline to be spent over FY20-25. The proposed NIP has identified projects across 23 sectors and 18 states and Union Territories, which will be funded by the central and state governments as well as the private sector. Of the proposed projects, 39 per cent each would be implemented by the Centre and states, and the rest 22 per cent by private players.

The past few quarters have witnessed weak overall demand in India due to slow construction activity, but there was improvement on month-on-month basis in December 2019.

“The volume push by many companies as to meet year-end target, improvement in construction activities post lifting on construction ban by the supreme court in select Northern belts and continued traction in trade demand after festivals were the key drivers for cement demand during the month,” analysts at Reliance Securities said in sector update.

The dealers expect that cement prices to rise across most of the regions as they have been indicated by the companies for price hike to the tune of Rs10-60/bag from the beginning and mid of January 2020, it added.

“Demand has picked up recently, which has improved visibility of growth in January-March quarter (Q4FY20). While overall demand in the country should be better in FY21 (around 6 per cent YoY), the East should see stronger growth (around 10 per cent YoY),” analysts at Motilal Oswal Securities said in sector update.

A sequential recovery of sales volumes and lower opex (due to lower pet coke prices- down approx. 30 per cent in calendar year 2019 and lower maintenance costs) would benefit companies in the September quarter and average EBITDA/ton should remain similar to that of Q2FY20, said analysts Reliance Securities.

PRISM JOHNSON 68.75 63.60 8.1
NCL INDS. 93.00 87.25 6.6
STAR CEMENT 94.15 88.80 6.0
ORIENT CEMENT 76.05 72.05 5.6
INDIA CEMENTS 77.15 73.15 5.5
SANGHI INDS. 39.80 37.75 5.4
MANGALAM CEMENT 300.00 285.15 5.2
SHIVA CEMENT 14.35 13.67 5.0
HEIDELBERG CEM. 183.00 175.05 4.5
AMBUJA CEM. 204.50 196.85 3.9
JK LAKSHMI CEM. 299.20 288.35 3.8
ULTRATECH CEM. 4212.60 4062.80 3.7
THE RAMCO CEMENT 779.45 752.30 3.6
ACC 1485.25 1439.45 3.2
BIRLA CORPN. 621.30 605.55 2.6
SHREE CEMENT 20845.60 20326.90 2.6
J K CEMENTS 1205.00 1177.80 2.3
DALMIA BHARA. 818.00 802.85 1.9

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