Cement stocks rally on strong demand hopes; Shree, JK Cement hit new highs

The Budget for the financial year 2021-22 (FY22) laid increased thrust on higher government capex on infrastructure (roads, railways and metro), which could boost demand, if executed well, believe analysts
Shares of cement companies were in focus in Thursday's trading session, with Ambuja Cements, Shree Cement, JK Cement and the Ramco Cement hitting their respective new highs on the BSE, on strong demand expectations.

Besides these stocks, UltraTech Cement, ACC, JK Lakshmi Cement, India Cements, Orient Cement, Prism Johnson and Star Cement from the S&P BSE Allcap index were up in the range of 2-6 per cent on the BSE. In comparison, the S&P BSE Sensex was up 0.82 per cent at 50,067 around 01:35 pm.

The cement sector is set to report strong double-digit volume growth during the January-March quarter (Q4FY21) given the low base and sharp recovery in the cement demand, led by higher government spending and strong rural economy. Sustained demand from individual housing (IHB) in the semi-urban, rural region and a healthy pick-up in infra activities is expected to aid growth in volumes during Q4FY21.

"In terms of regions, demand in the east and north are likely to remain strong with plant utilisation in the east region expected at over 90 per cent whereas plant utilisation in the north is expected to operate at over 85 per cent. Further, demand in the south and west would largely be supported by a pick-up in government-led infrastructure activities leading to healthy sales volume growth during the quarter at all India level," ICICI Securities said in cement sector Q4FY21 results preview.

The Budget for the financial year 2021-22 (FY22) laid increased thrust on higher government capex on infrastructure (roads, railways and metro), which could boost demand, if executed well, believe analysts. Coupled with strong rural housing demand and improving urban housing in Tier 2 or 3 cities, the industry may see healthy demand for the next few years, analysts at Emkay Global Financial Services said in a sector update.

Aided by a low base of March 2020, the industry is likely to report over 20 per cent year on year volume growth in Q4FY21E and broadly flat volumes YoY in FY21E, in our view, the brokerage firm said.



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