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Informist, Thursday, Nov. 14, 2024

MUMBAI – Shares of most cement companies may continue to fall next week as the near-term factors for the sector remain weak. An extended monsoon and delays in new orders from the government for infrastructure projects have hit the financials of cement companies, two analysts tracking the sector said. Most cement players also posted poor financial performance for the September quarter, with both bottom line and top line declining from the year-ago period due to lower realisation, pricing pressures, and muted demand trends.

However, these two analysts expect the second half of the financial year to be better for the sector. "More government orders and capex, improved demand, cost efficiency measures, possible mergers and acquisitions, and possible price hikes could make things better for (cement) manufacturers," one of the two analysts said.

Cement players could not absorb the benefits of price hikes made a few months ago, particularly due to muted demand. "...prices have largely bottomed out in southern and eastern regions. We believe prices are unlikely to fall from current levels; however, odds of any substantial price hikes in near term remain bleak due to elevated competitive intensity," Nuvama Institutional Equities said in its report Tuesday. The broking firm said it stays cautious on the sector. 

Cement companies were among the few sectors that saw an on-year decline in their top line and bottom line for the September quarter, similar to that of some oil and gas players in India. Shares of most cement companies closed lower compared to a week ago, with Sagar Cements, Andhra Cements, and JK Lakshmi Cement closing nearly 6-9% down.

This week, Shree Cement and The Ramco Cements released weak quarterly financial results. Shree Cement's net profit fell a whopping 81% on year to INR 931 million, but beat the Street's estimate of INR 789.4 million. Revenue from operations fell more than 18% to INR 37.27 billion, lower than the market's expectation of INR 39.47 billion. In a post-earnings call with analysts, the management said slower rollout of the government's capital expenditure projects, a prolonged monsoon, and a softening in manufacturing momentum led to subdued demand for cement in the quarter. The stock closed 0.2% higher at INR 24,091.70 on the National Stock Exchange Thursday.

The net profit of Ramco Cements fell nearly 75% from the year-ago period to INR 255.8 million in the September quarter and revenue fell 13% to INR 20.38 billion. Shares of the company closed 2.1% higher at INR 902.35. 

The Indian stock market is shut Friday on account of Guru Nanak Jayanti.

TOP HEADLINES
* Fitch affirms UltraTech's long-term foreign, local-currency rating at 'BBB-'
* Analyst Concall: Shree Cement focused on value over volume Jul-Sept
* Earnings Review: Shree Cement PAT beats Street, dn YoY on lower sales volume
* Gujarat Ambuja Exports gets environmental nod for greenfield plant at Malda
* Earnings Outlook: Paints, B2B losses seen dragging Grasim Jul-Sept margins
* Ramco Cements Jul-Sept PAT falls 74.7% YoY, sales fall 12.5%

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:

End

Reported by Anjana Therese Antony

Edited by Ashish Shirke

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