Major brokerage firm, Nomura, recently upgraded several cement stocks, notably UltraTech Cement, Dalmia Bharat, Ramco Cements, and Shree Cement, extending a ‘Buy’ rating. Stating that the cement momentum will continue in India, Nomura has upgraded Ultratech to buy from neutral with a target price of Rs 11,500. Dalmia Bharat’s target has been raised to Rs 2,900 and Ramco Cement to Rs 1,250.
It has maintained a buy rating on Shree Cement but increased the target price to Rs 33,400 from Rs 27,800 earlier.
Following the upgrades, Ultratech shares jumped 3.5 per cent to hit a 52-week high of Rs 10,379.70 on BSE. Dalmia Bharat stock rose 3 per cent to Rs 2,301.70, while that of The Ramco Cements went up by 5 per cent to Rs 1,037.45.
Shree Cement was also trading about 1 per cent higher.
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 Rs 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 had said earlier.
The average prices of cement in India fell by around 2 per cent on month in August to Rs 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.
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.
In the September quarter, the performance of Ambuja Cement, Shree Cement, JK Cements, JK Lakshmi, Orient Cement, and Star Cement were above expectations. UltraTech Cement delivered in-line performance while ACC, Dalmia Bharat, Heidelberg Cement, and Birla Corp delivered underperformance, Axis Securities said.
Cement volume for companies tracked by the brokerage grew by 14%, driven by better demand from both trade and nontrade segments in Q2.
“Despite companies adding capacities, we believe that cement demand will outpace the cement supply. Sustainability of higher prices and trend in fuel prices remains key monitorable,” Axis had said earlier.
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