On June 26, 2024, cement stocks experienced significant gains. Share Prices of companies like India Cements, UltraTech Cement, Dalmia Bharat, Ramco Cement and Ambuja Cements surged between 2% to 15%. According to analysts, this rally is due to the stability of the current government and optimism of continued infrastructure development efforts.
Top Performers in the Cement Sector
Among the top gainers, India Cements saw a remarkable 15% increase. It reached a day’s high of INR 267.50 per share on the NSE. This positive movement has pushed India Cements into the green for the year, with a 25% rise over the past 12 months. UltraTech Cement also posted a notable gain of 2.71%, with its shares priced at INR 11,140.20.
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Brokerage Views on Cement Stocks
Despite the overall positive trend, brokerage firm CLSA downgraded their rating on Dalmia Bharat from ‘Accumulate’ to ‘Underperform’. The cited uncertainties in growth prospects. CLSA reduced its price target for Dalmia Bharat to INR 1,900 per share. CLSA said that while Dalmia Bharat’s organic expansion is on track, achieving medium-term capacity targets may be challenging.
Government Schemes Boosting Demand
Centrum Broking highlighted the impact of the Pradhan Mantri Awas Yojana (PMAY) on cement demand. According to the brokerage firm, PMAY has historically been a significant driver for the sector. Centrum Broking anticipates a 200 to 250 basis points increase in demand for cement. They expect a 5-6% rise in the financial year 2025. However, they predict a weaker performance in the first half of the fiscal year. This might be due to the election period and the monsoon season.
Emkay Global’s Positive Outlook
Emkay Global reported that cement stocks within its coverage had rallied 6-20% in the last month. This rally can be seen especially among southern players like Ramco, Sagar and KCP. The brokerage attributes this to the stability of the government and the promise of sustained infrastructure development. They noted a healthy volume CAGR of 9-10% from FY21-24. This is above the historical average of 5-6%.
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Price Trends and Future Expectations
Currently, cement prices are at a three-year low. They are suggesting that they may have bottomed out. Emkay expects a gradual recovery in demand and prices post-elections. An anticipated steady demand CAGR of 7-8% over the next few years will be seen. Cement sector is trading at a 10% premium to its historical 5-year average. Emkay remains optimistic, with UltraTech and Ambuja among its top picks.
The recent surge in cement stocks reflects market optimism driven by a stable government and infrastructure initiatives. Still, there are some concerns about growth sustainability. The overall outlook for the cement sector remains positive. The analysts expect steady demand and gradual price recovery.
About the Author
Mr. Radhesh Tarang Shah, is a third-year management student at Institute of Management, Nirma University. He has a passion for writing articles and poems. He has experience as a financial analyst, author, news writer, marketer and social worker.
