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Informist, Saturday, Feb. 1, 2025

MUMBAI - Analysts are divided on the direction of cement stocks for next week. While the likely price hikes are expected to push these stocks higher in the near term, they may be weighed down by the disappointing capital expenditure projection of the government.

The largely negative trend on the technical charts with intense selling is expected to continue in cement stocks, Nirav Harsh Chheda, assistant vice-president of derivatives and technical research at Nirmal Bang Equities, said. These stocks have broken important support levels and the trend may remain bearish due to the muted announcement in the Union Budget for the financial year 2025-26 (Apr-Mar) with regard to capital expenditure. If these stocks enter a correction zone, they may fall 15-20% over the next 2-3 months and take a while to recover, he said.

The government revised its estimate for capital expenditure in FY25 to INR 10.18 trillion, from INR 11.11 trillion, in the Budget presented Saturday. Also, its allocation for capital expenditure for FY26 rose only 1% over the FY25 Budget estimate to INR 11.21 trillion, which one analyst, who was expecting an increase of nearly 15%, characterised as a big miss.

In contrast to technical analysts, however, fundamental analysts were bullish about the performance of cement stocks and said they may rise 3-4% in a week or the near term owing to another round of price hikes expected in a week or two. Though the relatively modest push in allocation for government capital expenditure was disappointing for some, others were confident that the focus on execution of existing infrastructure projects would yield positive outcomes, especially for the March quarter. 

In a bid to boost infrastructure, Finance Minister Nirmala Sitharman announced a three-year pipeline for projects that can be implemented through the public-private partnership model. The Budget also has an outlay of INR 1.5 trillion for 50-year interest-free loans to states for capital expenditure as an incentive for reforms. All of this, including the push on asset monetisation, was lauded by market participants.

"Cement realisations are currently witnessing gradual improvement and may continue to improve since the government has broadly maintained the capital expenditure allocation in the Budget," said Vincent K. Andrews, a fundamental equity research analyst at Geojit Financial Services. "The government is expected to expedite the infrastructure projects, which had slowed down in the first half of FY25, and that may support cement prices. Demand and realisations remain key (parameters) for cement companies."

The outlook of the ACC and Ambuja Cements managements when releasing the December quarter earnings was mostly positive on demand, pricing, and cost optimisation, an analyst said. Even if growth for the industry is projected at 3-4%, cement companies themselves will grow at 7-8%, an analyst tracking cement stocks at a domestic broking firm said. 

The consolidated net profit of Ambuja Cements jumped 2.6 times on year to INR 21.15 billion and consolidated revenue rose 4.5% on year to INR 84.15 billion. The earnings were boosted by a nearly sevenfold increase in the company's other income and an 11-times rise in government grants, including duty credits and refunds, to INR 9.13 billion in Oct-Dec. ACC's consolidated net profit more than doubled on year to INR 10.92 billion and its consolidated revenue from operations for the quarter rose 7.3% on year to INR 52.07 billion. Shares of Ambuja Cements and ACC ended 2.2% and 0.3% lower, respectively, on the National Stock Exchange Saturday.

Among other cement companies that released their December results during the week, Shree Cement reported a 13% fall on year in revenue, failing to meet analysts' expectations. The company's net profit also missed analysts' estimates and fell 69% on year. JK Cement's net profit for Oct-Dec surpassed analysts' expectations but still declined 29% on year. Its revenue also fell 2.5% on year. Shares of Shree Cement closed 1.6% lower and those of JK Cement ended 2.3% down on the NSE.

Grasim Industries is scheduled to post its December quarter earnings Sunday. The cement major is expected to report a net loss of INR 41.75 million and a 27.7% rise in sales to INR 81.72 billion, as per an average of four brokerage estimates compiled by Informist.

TOP HEADLINES
* Earnings Review: Shree Cement Oct-Dec net profit, revenue miss Street's view
* JK Cement says 4 workers dead, 14 injured in accident at Panna site
* JK Cement in pact with Gujarat Mineral for supply of high-quality limestone
* Analyst Concall: Ambuja Cements, ACC aim ""organic"" growth from FY26
* Earnings Review: Ambuja Cements Oct-Dec PAT up strongly, EBITDA margin dn
* PRESS: UltraTech Cement in talks to acquire HeidelbergCement India
* Earnings Review: Govt grant, tax breaks lift ACC's Oct-Dec consol PAT YoY
* Earnings Outlook: Shree Cement volume seen recovering, but with mixed impact
* JK Cement board gives in-principle nod to buy 60% stake in Saifco Cements
* JK Cement Oct-Dec net profit falls 29.2% YoY, sales down 2.5%
* Gujarat Ambuja Exports Oct-Dec PAT falls 28.6% YoY, sales down 13%

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 Rajeev Pai

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