Cement stocks strengthened in trade on Thursday after a Jefferies report pointed out that cement prices jumped in February in North India while remaining mostly stable in the rest of the country.

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The price hike in cement for February 2023 was largely confined to the North while the all-India average remained flat, with the East and the West seeing some dip, said Jefferies in a note dated March 1.

There were multiple rounds of price increases in the North, along with some reversals, with an overall price increase of Rs 10-20 per bag.

“Dealers indicated some discipline improvement and small shortage in peak construction period due to closure of ACC/Ambuja Himachal plants for 2 months till the 3rd week of February resulting in the price increase,” said the note.

Jefferies also highlighted that no major signs of price hikes are expected in March as the companies are now focusing on year-end volume targets.

Jefferies on Cement Stocks:

The Jefferies note said that cement prices have been supported by robust demand in the infrastructure segment in February 2023, although some sluggishness was seen in the housing segment.

“While demand was lumpy in the current fiscal, strong growth in budget allocation for infra projects and likely pre-election spending augurs well for the next fiscal volume growth,” it added.

In terms of earnings, Jefferies pointed out that seasonal price increases during February-May would be a key factor for cement companies.

“While energy costs have been moderating, the focus on volumes by producers and postponement of seasonal price hike, except the North, is a risk for the fiscal 2024 earnings estimate, unless fuel costs slide down further sharply from here,” the note said.

(Edited by : Rukmani Krishna)