Cement Stocks Outlook
Seen range-bound; high valuations may weigh
This story was originally published at 22:22 IST on 16 August 2024
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MUMBAI – Shares of cement companies are seen moving in a range next week as the monsoon season is expected to affect the demand in the current quarter. Analysts said that the valuation of stocks in the sector is not cheap, which may weigh on the stocks.
"We believe the monsoon season may continue to strain demand and cement prices in Q2 (Jul-Sep), resulting in soft margin for most cement firms in Q2 as well," Elara Securities said in a report. However, after the monsoon season, the market anticipated a pick-up in demand near the end of September, a research analyst covering the sector said. "Additionally, subdued fuel prices along with most cement firms' ongoing efforts to implement cost-saving measures bode well for margin," Elara report said. The prices are also expected to improve after the pickup in demand, the analyst said.
Grasim Industries reported weak quarterly earnings this week and missed the analysts' estimates. A major contributing factor to the weak earnings of the company was a 47% on-year fall in operating profit, as denoted by earnings before interest, tax, depreciation, and amortisation, to 4.18 bln rupees. The EBITDA margins halved to 6% in Apr-Jun from 12% a year ago. Despite weak earnings, Sharekhan said in a report that the company's efforts to increase asset productivity and focus on increasing value-added products are expected to yield results as demand recovers.
Today, shares of Grasim Industries closed 3.5% higher on the National Stock Exchange. Grasim gained over 1% this week, while UltraTech Cement was largely unchanged this week.
TOP HEADLINES
* Grasim to buy 26% stake each in 2 SPVs for 24.6 mln rupees
* Grasim net loss 521 mln rupee vs PAT year ago, EBITDA down 47%
Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:
| Company | Price | Week-on-week change in % | Resistance | Support |
| ACC | 2337.90 | (-)0.60 | 2372.20 | 2273.40 |
| Ambuja Cements | 640.50 | 1.30 | 653.80 | 616.80 |
| India Cements | 364.95 | (-)0.60 | 368.80 | 361.70 |
| Shree Cement | 24642.85 | 1.40 | 24961.20 | 24120.60 |
| UltraTech Cement | 11295.70 | (-)0.00 | 11565.10 | 10815.50 |
| Nifty 50 | 24541.15 | 0.70 | 24795.90 | 24077.10 |
| S&P BSE Sensex | 80436.84 | 0.90 | 81298.80 | 78875.70 |
End
Reported by Anjali Singh
Edited by Akul Nishant Akhoury
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