Shares of cement companies, including UltraTech, JK Lakshmi Cement, JK Cement, Mangalam Cement, and Shree Cement, recorded robust gains in Monday’s trading session, rising between 4% and 9%. UltraTech emerged as the top gainer on the Nifty 50 index. Brokerage firm Jefferies attributed the rally to anticipated monthly price hikes and improved industry outlook, predicting a ₹10-15 per bag price increase in December.
In November, cement prices remained stable, with a modest 1.5% to 2% rise in the third quarter compared to the previous quarter. Jefferies noted that price declines appear to have bottomed out, with dealer feedback signaling optimism. The industry expects 8%-10% year-on-year volume growth in the financial year’s second half, driven by government capital expenditure and recovery in the March quarter.
Petcoke prices, a key input cost, averaged $95 per tonne in November, a slight month-on-month increase but still below September’s $100 per tonne levels. Sequentially, third-quarter spot prices are down 12%, and 26% lower year-on-year, offering some relief on production costs.
Current valuations of major cement players indicate mixed trends:
- UltraTech Cement: $211 EV/Tonne
- Shree Cement: $138 EV/Tonne
- JK Cement: $139 EV/Tonne
- Ramco Cement: $110 EV/Tonne
- Dalmia Bharat: $88 EV/Tonne
- Nuvoco Vistas: $77 EV/Tonne
- Birla Corp: $67 EV/Tonne
- Heidelberg Cement: $85 EV/Tonne
- JK Lakshmi Cement: $67 EV/Tonne
Despite this positive momentum, Shree Digvijay Cement’s Anil Singhvi expressed caution, predicting only 3%-4% cement demand growth for FY24, with limited visibility on significant price hikes.
The cement industry’s performance hinges on sustained demand recovery, successful price adjustments, and favorable input costs. With government infrastructure spending likely to boost volumes, the sector may see improved earnings in the coming quarters.
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