Informist, Friday, Sep 6, 2024

MUMBAI - Shares of cement companies are seen slightly lower next week as extended weakness in prices is likely to affect September quarter earnings of companies in this space. Moreover, there is uncertainty if the industry will absorb price hikes as demand remains weak. However, a better outlook for the second half of this financial year may limit any downside in cement stocks.

Emkay Global Financial Services said in a report on Monday that the industry absorbed partial price hikes in August, but demand was still weak. It said that cement prices increased 5 rupees on month to 355 rupees in August. "...the pan-India demand likely declined by high-single digit YoY in Aug owing to the ongoing heavy monsoons, limited sand availability, and delay in pickup in government spending," the brokerage said.

The brokerage further said lower cement prices may lead to a decline in EBITDA per tn by 125 rupees in Jul-Sep compared to the previous quarter. EBITDA refers to earnings before interest, tax, depreciation, and amortisation.

Analysts said that cement prices are likely to rise soon once the monsoon season ends and construction activity begins. In the longer term, analysts are positive on the sector considering the government's plans of spending on building infrastructure. S&P Global on Monday said the government plans to spend $1.7 trln on infrastructure and with this kind of expenditure, large cement companies will be able to fund expansion with minimal impact on their credit profile.

S&P Global said demand for cement is likely to grow at a compounded annual growth rate of 7% over the next four years. Cement capacity in India is expected to grow over 25% by 2028, S&P Global said. "The bulk of the new capacity will come from the top-three cement producers, leading to further consolidation in the industry," S&P Global said.

TOP HEADLINES
* SEBI puts JSW Cement 40-bln-rupee IPO on hold
* Nomura expects cement cos to raise prices 4% in Sep

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 Anshul Choudhary
Edited by Aditya Sakorkar

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