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Cement stocks like ACC, Ambuja Cement and Shree Cement rallied on Wednesday after price hikes in an otherwise weak market. The recent price hike comes after the fall in cement prices by approximately Rs 40 to 60 per bag since May 2022.

The sector is seeing input costs decline and brokerage houses Emkay and Jeffries believe that this will lead to a better second half of this fiscal.

Stocks like Shree Cement and UltraTech Cement have seen a big correction from the recent peaks but ACC and Ambuja Cement are trending ahead.

Aditya Saraogi, Chief Financial Officer at Birla Corporation and Rajesh Ravi, Institutional Research Analyst at HDFC Securities discussed the overall outlook for the sector.

“Among the two stocks, ACC and Ambuja, the valuation is much comfortable in case of ACC, while Ambuja - on a standalone basis - is trading north of $180-190. So we obviously believe that ACC has more valuation comfort as a standalone entity. The stock is trading at less than $120 per tonne today. So we find ACC to be more comfortable and we find there is more upside in case of ACC versus Ambuja,” said Ravi.

Adani Enterprises in August launched an open offer worth Rs 31,000 crore to acquire 26 percent stake each in Swiss firm Holcim's two Indian listed entities Ambuja Cements and ACC from public shareholders recently.

Also Read | Adani Enterprises replaces Shree Cement in NSE's Nifty50 from September 30

Aditya Saraogi of Birla Corporation believes that cement volumes should grow by closer to 15 percent in FY23 despite the fact that the industry had a couple of months of lull period this year.

“Monsoon is typically a weak season from a demand point of view. And this year because of slightly higher monsoons, the demand was tepid. But thanks to the good monsoon in the coming months, we expect the demand to pick up meaningfully,” he mentioned.

Also Read: Cement prices declining in most markets due to monsoon: Jefferies

Earlier in July, the Competition Commission finalised a report on its investigation into the alleged cement cartelisation operating in the eastern and southern regions of the country.

Krishna Kumar Karwa, Managing Director at Emkay Global believes that cement is a sector which is going through consolidation and will continue to consolidate. “It is better to stick to the larger names in that sector and maybe to some of these large midcap companies, which have all India presence and ability to be participating in the consolidation."

Also Read: Being a Nifty stock is not enough, ask Shree Cement

He believes the second half of the year is expected to do much better for these companies as input pressure come off and realisation also inches up.

For the entire discussion, watch the accompanying video

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(Edited by : Abhishek Jha)

First Published:Sept 7, 2022 3:00 PM IST