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Informist, Friday, Mar. 21, 2025

MUMBAI – Shares of cement companies are likely to fall in the near-term if these companies do not take price hikes by the end of April, analysts said. Against hopes of a revival in the second half of the current financial year, the government's capital expenditure has dried up, they said. Analysts expect price hikes of 2-3% or INR 10-INR 15 per 50-kg cement bag. Companies are also trying to cut down costs on power and fuel, which will help improve their profitability in the near term and the next couple of years, they said.

Though there have been price hikes from November, prices are nowhere near their peaks of October 2023, Jennisa Popat, an equity research associate covering the cement sector at Systematix Institutional Equities, said. Multiple price hikes were attempted in January, February and March, and another 2-3% of price hikes could be expected in the near term, she said. Though the momentum of price hikes will likely continue to be slow in the June and September quarters, better price hikes can be seen only from the Oct-Dec, she said.

All major cement companies are trying to reduce power, fuel, freight costs by INR 150-INR 200 per tonne, Popat said. They are trying to reduce freight costs between the factory and end-consumption users by placing distributors strategically, she said. Improving cost per tonne on an on-year basis could boost profitability, she said. Lower costs will be reflected in March quarter earnings because of operational efficiencies, and there would be a sequential uptick in profitability, she added. Popat is bullish on UltraTech Cement and Ambuja Cements as they are capturing market share aggressively, working on cost efficiencies, and ramping up capacities. She has an 'overweight' view on large-cap cement stocks for the medium term.

Cement companies have been undertaking price hikes from December, which are growing at a pace of 1-2%. This growth in price increases still continues, Nishant Bagrecha, a research analyst covering the cement sector at Incred Equities, said. In the first and second weeks of April, cement companies could take price hikes of INR 15-INR 20 per bag, Bagrecha said. On the expenses side, input cost are rising, with petcoke prices up 20-25%, which could impact the profitability of cement players in the June quarter of FY26, Bagrecha said. To offset the rise in costs, these companies need to take price hikes in April, he said. 

Ambuja Cements has a target to bring down the overall cost by INR 500 per tonne. If they do so, they will match Shree Cements' cost per tonne, which is the best in the industry, Bagrecha said. Decline in costs will improve profitability and a decline of INR 100-150 per tonne can be anticipated for FY26, Bagrecha said. He expects UltraTech to register a 7-8% growth in volumes and sees the profitability on earnings before interest, taxes, depreciation, and amortisation per tonne to improve by INR 150-180 on quarter and by INR 120-150 per tonne at the industry level.

According to Bagrecha, Dalmia Bharat has cheaper valuations as compared to other players. Valuations of UltraTech, Shree Cement, J.K. Cement are at fair levels and that of Ambuja Cements are favourable, he said. If there are no price hikes in the near term, there could be pressure on cement stocks, he said.

On Friday, shares of cement companies that are a part of the Nifty 500 closed higher. J.K. Cement was the top gainer, ending higher by 3.5%, while Grasim Industries was up marginally.

TOP HEADLINES   

* UltraTech raises grey cement capacity at 2 units by a combined 1.2 mtpa
* India Cements board OKs sale of equity investment in arm Coromandel Travels
* ANALYSIS: UPL tax write-back helps Nifty 200 chemical cos exceed Q3 PAT view
* Dalmia Bharat arm starts production of 2.4 mtpa at grinding unit in Assam                

Following are the resistance and support levels for the stocks for next week as per calculations by Informist based on their prices on the National Stock Exchange:

End

Reported by Noopur Bhandiwad

Edited by Ashish Shirke

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