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Informist, Friday, Jan. 17, 2025

MUMBAI – Shares of major cement companies will likely spike 4-5% the day they announce price hikes--expected to be in the range of INR 15-INR 20 per bag by the end of January--an equity research analyst at a domestic broking firm covering the sector said. The cement industry is finally showing signs of recovery on the back of improved demand, volume-based growth, and anticipated price hikes. The second half of the current financial year is going to be better than the first half for cement companies as the government heightens focus on infrastructure projects, the analyst said.

Demand is primarily expected to come from real estate, housing, and road projects, analysts said. This is expected to grow at a compound annual growth rate of 7-8% over 2024-25 (Apr-Mar) and FY27, according to JM Financial Institutional Securities. The broking firm recently initiated coverage on the sector with a 'buy' rating on ACC, Ambuja, Birla Corp, J.K. Cement, and UltraTech Cement. It has a 'hold' rating on Dalmia Bharat, Ramco Cements, Shree Cement, and Star Cement.

However, worries about consolidation in the entire industry persist, with bigger companies acquiring smaller ones to gain market share and stifling competition. If larger players continue their aggressive consolidation strategy, it may even lead to a duopoly-like situation, with only UltraTech Cement and Adani-group-owned cement companies capturing the majority of the market share, Shubham Shelar, a research analyst covering cement and infrastructure companies at IDBI Capital Markets and Securities, said.

"UltraTech has plans to expand geographically and garner a pan-India presence to gain pricing power and become the market leader," the analyst covering cement companies said. "With JSW Cement entering the market with an INR 40 billion initial public offering, it is possible that JSW Cement may also acquire some smaller players," he added. 

For the December quarter, cement companies Ambuja Cement and Nuvoco Cement are expected to achieve double-digit growth, while others will likely experience mid- to high-single-digit volume growth year-on-year. In contrast, JK Lakshmi and Heidelbergcement India are expected to report declines in volume on a yearly basis, as per Nirmal Bang Institutional Equities. 

Average earnings before interest, taxes, depreciation, and amortisation/tonne may rise to INR 903 per tonne in the December quarter from INR 186/tonne in the previous quarter, according to JM Financial. Nirmal Bang said international petroleum coke and coal prices have declined 18% and 12% on year, respectively, and another analyst tracking the sector believes that petroleum coke prices are too volatile and could spike any time, which adds pressure on cement players' costs. 

On the earnings front, UltraTech Cement and India Cements are scheduled to post their corporate results for the December quarter next week. UltraTech's net profit is expected to fall 26.9% on year to INR 13 billion and its revenue is seen rising only 0.2% to INR 167.75 billion, as per the average of estimates from 12 broking firms. However, India cement is likely to post a net loss in the range of INR 1.35 billion-INR 1.44 billion, as per estimates from three brokerage houses. Revenue is seen between INR 9.74 billion and INR 11.41 billion, as per estimates. 

Shares of Andhra Cements fell the most among cement companies Friday and closed at INR 77.30, down 1.7%. ACC and Grasim Industries, and India Cements were the best performers, closing 0.3-1.4% higher.

TOP HEADLINES
* CRISIL, India Ratings revise outlook on Nuvoco Vistas' bank facilities
* IPO Alert: JSW Cement gets SEBI approval to raise up to INR 40 bln
* Grasim Ind suspends ops at Karwar plant on malfunction from power tripping

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 Noopur Bhandiwad
Edited by Deepshikha Bhardwaj

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