Shares of UltraTech Cement, ACC, Ambuja Cements, Shree Cements, Dalmia Bharat, Gujarat Ambuja Exports, Birla Corp, Ramco Cements, Nuvoco Vistas, ACC and Ambuja Cements ended 2-9% higher on the NSE.
While the September quarter is usually weak for cement producers because of lower offtake, as construction activities slow down, companies have been able to hike prices for this month after strong demand in August because of lower-than-average monsoon rains.
Cement companies have hiked prices by ₹10-35 per 50kg bag, with hikes sharpest in eastern India, Jefferies said. There is also a possibility of another price hikes in this region around mid of the month, the brokerage said.
The average prices of cement in India fell by around 2% on month in August to ₹358 per bag, while they were only marginally higher as compared to the previous year. Prices remained steady during the month in central and south India.
“While prices have been hiked, it will be important to see whether these are absorbed by the market,” said an analyst with a domestic brokerage. “Gains in cement shares will also hinge on whether these prices sustain.”
The surge in shares of cement-makers is backed by higher-than-usual volumes in almost all companies with shares of several companies hitting multi-month highs.Even as demand for cement is expected to be robust this year amid spending on infrastructure and housing, incremental capacities being added by several cement makers is expected to keep pricing competitive, experts said.
The June quarter saw cement companies clock in a volume growth of nearly 20% on year, with a quarter-on-quarter improvement in profitability helped by lower fuel costs. While companies will continue seeing the benefits of lower fuel costs in the September quarter as well, pricing will remain critical.
Apart from a positive momentum in the cement space, Shree Cements got an additional leg-up after Nomura Financial upgraded rating on its shares to ‘buy’ from ‘reduce’ earlier, for a target price of ₹28,700.
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