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Informist, Thursday, Mar. 13, 2025

MUMBAI – The cement stocks are likely to rise marginally in the near term and are likely to stay in a thin range due to uncertainty about the sustainability of price hikes, which has been taken for four months now in different parts of India, analysts said. Though there has been no correction in cement prices in the recent months, the implementation of further price hikes remains a concern due to the pressure on the companies to meet their year-end volume targets, analysts said. Major price hikes are only seen from April, a research analyst at a domestic broking firm said.  

According to Nuvama Institutional Equities, price hikes have bottomed out, and the chances of any major increase in the near term are slim due to intense competition and focus on volumes for the March quarter. Demand is anticipated to improve further in March due to a pick-up in government capital expenditure. The market is facing pricing pressure due to heightened competition among larger players seeking to gain market share and this is likely to persist until the anticipated cement capacity additions materialise by mid of 2026-27 (Apr-Mar) and FY28, Girija Shankar, lead cement analyst at YES Securities, said in a note Monday.

Moreover, the introduction of the Tamil Nadu Mineral Bearing Land Tax Act on minerals such as limestone has led to concerns about the profitability and growth of south India-based cement players such as Dalmia Bharat and The Ramco Cements, as this move is expected to push up raw material costs.

On the Tamil Nadu government tax levy of INR 160 per tonne on limestone, Dalmia Bharat said it will likely have an impact of around INR 1.3 billion per annum on the company, which it will try to pass on to its customers. South-based cement players such as The Ramco Cements and Dalmia Bharat will be adversely affected by the tax, and these companies would have to take price hikes to the tune of INR 5 - INR 10 to offset the impact on raw material costs, analysts said.

This is likely to have an earnings before interest, taxes, depreciation, and amortisation impact of 9% for Ramco Cements and 3% for Dalmia Bharat on estimates for FY27, JM Financial Institutional Securities said in a report Thursday. There are high chances of other states, such as Andhra Pradesh and Karnataka imposing mineral taxes in the future, analysts said. On Wednesday, shares of Dalmia Bharat touched an over two-year low of INR 1,601 on the news of the tax levy. 

It may not be possible for all cement companies to shift completely to coal in the short term, particularly for companies having poor quality of limestone, Elara Securities said in a report Thursday. However, cost inflation is likely to be transitory in nature, and the industry may peak out in the March quarter, the brokerage said.

There has been a rise in the prices of petcoke, which is a key fuel used in cement production, analysts said. China has imposed tariffs on coal imports from the US, but petcoke remains exempted, leading to a surge in petcoke demand from China's cement, aluminium, and glass manufacturers, Elara Securities said. However, demand from China for petcoke is expected to taper off in the coming months due to a surge in supply, which should pull down prices, it said. 

Thursday, all cement companies in the Nifty 500 ended down, with the shares of JK Lakshmi Cement the worst hit, ending 3.1% lower. Shares of Sagar Cements fell the least, ending 0.3% down.

TOP HEADLINES
* Dalmia Bharat says new Tamil Nadu mineral tax may hit co by INR 1.3 bln/year
* NCLT OKs transfer of cement, mining ops from 1 arm to another: Dalmia Bharat
* CARE assigns AAA rating to UltraTech's fixed deposits worth INR 740 mln

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 Saji George Titus

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