Shares of cement companies rose up to 10% today even as the sector continued to battle with input cost pressures.
Ambuja Cement and JK Lakshmi Cement hit their respective record highs.
Despite June being a seasonally weak quarter, cement prices stood firm across most regions in India.
Average cement prices on a pan-India basis rose around 6% sequentially during quarter ended June 2021.
An uptrend in cement prices bodes well for the profitability of the cement sector.
Lately, the cost of key input materials have increased sharply, pointing to pressure on margins.
Average domestic pet coke prices are up 11% sequentially and 85% on a year-on-year (YoY) basis.
Imported coal prices are also up 16% sequentially and 60% YoY.
Apart from high prices, volume growth also aided sentiment.
Reports suggested that industry volumes likely increased in June 2021 and recovered to April 2021 levels, owing to the easing of restrictions and pent-up demand.
Volumes likely grew less than 20% sequentially in the north, east and south regions and in low double digits in the west and central regions.
The financial year 2021 was a challenging year, but cement companies reported a decent performance for the quarter ended March 2021.
A recent analysis by a rating agency showed that net profit of 10 major listed cement companies rose by 29.6% on an average in 2021.
This was due to a step up in infrastructure and construction activities in India.
The recovery in the second half drove a strong improvement in the cement companies' profitability.
Mainly, the price hikes in the later part of the fiscal supported the profitability.
Cement companies took consecutive price increases in March, April, and May.
Volumes were up 15% sequentially and improved more than 25% YoY, while EBITDA / tonne was up 3% compared to the previous quarter.
However, one must note that the second Covid-19 wave still remains a key risk.
We reached out to Brijesh Bhatia, Research Analyst at Equitymaster, and editor of the premium monthly recommendation service Fast Profits Report, for his technical view on the cement sector.
Here's what he has to say...
Most of the cement stocks ended on a positive note today, gaining in the range of 3-10%.
JK Lakshmi Cement share price gained the most, rising as much as 10% to a new high of Rs 674.
The Ramco Cements and India Cements ended up in the range of 4-5%.
Big companies including ACC, Ambuja Cement and UltraTech Cement also rose 3%.
Note that most cement stocks have more than doubled in the year gone by. Some have even tripled.
Have a look at the table below to see cement stocks' performance over the past year.
Company | % change over a year |
---|---|
Keerthi Industries | 343 |
Shiva Cement | 288 |
HIL | 285 |
Udaipur Cement | 238 |
Sagar Cements | 229 |
Prism Johnson | 199 |
Dalmia Bharat | 187 |
JK Lakshmi Cement | 147 |
JK Cement | 117 |
Birla Corporation | 105 |
Ambuja Cement | 82 |
UltraTech Cement | 78 |
The Ramco Cements | 66 |
India Cements | 59 |
ACC | 53 |
India is the second-largest producer of cement in the world, with an overall production capacity of 500 m tonnes per annum (MTPA).
This contributes to roughly 30% of the emissions accruing from the country's manufacturing sector.
It remains to be seen how the second wave and lockdown restrictions by several states, affect the cement sector.
To get a complete overview about the sector, read our cement sector report.
You can also compare cement stocks on our website.
Ambuja Cement vs JK Lakshmi Cement
To know what's moving the Indian stock markets today, check out the most recent share market updates here.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...
Yash Vora is a financial writer with the Microcap Millionaires team at Equitymaster. He has followed the stock markets right from his early college days. So, Yash has a keen eye for the big market movers. His clear and crisp writeups offer sharp insights on market moving stocks, fund flows, economic data and IPOs. When not looking at stocks, Yash loves a game of table tennis or chess.
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