More Stories

Informist, Friday, Jan 3, 2025

MUMBAI - As there is not much progress in the government's capital expenditure trend, some analysts tracking cement companies sounded cautious about the sector's near-term performance. One analyst said no major improvement is expected in government spending till the second half of the next financial year, raising worries about a potential fall in cement stocks in the near term. Market watchers were increasingly betting on government spending to gain traction during Oct-Mar, but now some believe the government may even miss the FY25 capital expenditure target by a wider margin. 

"While we anticipate an uptick (in government spending) for the last four months (of FY25), it is likely to fall short of the annual target by INR 750 billion," Elara Securities India said in its report. The Budget has set a capital expenditure target of INR 11.11 trillion for 2024-25 (Apr-Mar), up 17.1% from INR 9.49 trillion a year ago. The government's capital expenditure in Apr-Nov declined 12.3% on year to INR 5.14 trillion, according to data released by the Controller General of Accounts.

The Indian cement industry is expected to grow at about 5-6% in Oct-Dec, Tushar Chaudhari, vice president of institutional research at Prabhudas Lilladher, said. Chaudhari is bullish on cement companies in the near term due to a sequential growth of 2% in cement prices, softer fuel prices, and expectations of substantial improvement in volume growth from the December quarter. "There is an expectation of a further price hike of INR 10 for 50 kg bags in January if demand sustains. This would significantly boost companies' EBITDA/tn," he said. 

Although valuations are still on the higher side, Tushar expects large-cap companies like UltraTech Cement and Ambuja Cements to outperform the sector with their aggressive strategies to acquire capacity market share, improve volume growth and drive efficiencies to reduce costs of production. He also sees potential in ACC as management is working on improving cost efficiencies at old units and delivering EBITDA/tn in line with its parent Ambuja Cements. 

In the coming weeks, the primary focus of the investors will shift to December quarter earnings. Although cement prices increased in December, no significant impact on realisations is expected in Oct-Dec due to the weakness in prices during Oct-Nov, YES Securities said in its earnings preview report. "We may see pressure on top-line growth, but lower operating costs may save margins," it said. Cement companies were among the few players which posted a year-on-year decline in both net profit and revenue during the September quarter due to lower realisation, extended monsoon, poor demand, and lower capital expenditure. 

TOP HEADLINES
* SC notice to Ultratech Cement on Shree Cement plea in freight terminal case
* JK Lakshmi gets 'no objection' from bourses for proposed merger scheme

* BSE, NSE give no-objection to merger of Adani Cementation, Ambuja Cements 

* Ramco Cements commissions additional waste heat recovery turbine plant 
* Suresh Patil named new India Cements CEO after Srinivasan's resignation

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

With inputs from Noopur Bhandiwad
Edited by Saji George Titus

For users of real-time market data terminals, Informist news is available exclusively on the NSE Cogencis WorkStation.

Cogencis news is now Informist news. This follows the acquisition of Cogencis Information Services Ltd by NSE Data & Analytics Ltd, a 100% subsidiary of the National Stock Exchange of India Ltd. As a part of the transaction, the news department of Cogencis has been sold to Informist Media Pvt Ltd.

Informist Media Tel +91 (22) 6985-4000
Send comments to feedback@informistmedia.com

© Informist Media Pvt. Ltd. 2024. All rights reserved.