Cement shares extend rally; Deccan Cements, Mangalam Cement hit new high
Prism Cement, Deccan Cements, Orient Cement, Panyam Cement and Gujarat Sidhee Cement were up in the range of 5% to 12%, while Star Cement, India Cements, HeidelbergCement India, Sanghi Industries and Shree Cement up 2% to 4% on BSE on Friday. On comparison, the S&P BSE Sensex was up 0.44% at 34,118 at 11:19 AM;
Deccan Cements, Mangalam Cement, Prism Cement, Sanghi Industries, Star Cement and NCL Industries have hit their respective record highs on BSE.
ICRA projects demand growth for 2018-19 to marginally increase to 4-5%. This is primarily on the back of pick up in the affordable and rural housing segments.
However, the sector might face pressure on its profitability, given the rising costs of input materials and muted capacity utilisation levels, which are seen hovering around 65%.
According to a report by ICRA Ratings, cement makers have witnessed rising energy and freight costs on the back of higher prices of pet-coke, coal and diesel during the first half (H1) of 2017-18, the Business Standard reported. CLICK HERE TO READ FULL REPORT.
Analysts at Antique Stock Broking strongly believe pickup in price trend would be similar this year as well led by improved visibility of demand and better utilisations.
“While we acknowledge demand in urban housing segment has been under stress, Cement demand should benefit led by an improvement in rural demand and pick-up in government infrastructure/affordable housing projects. Further, the construction growth should benefit with increased government spending ahead of general elections of 2019,” the brokerage firm said in sector update.
Cement demand witnessed a moderate up-tick in Dec’17, as pick-up in construction activities post festivities and harvesting season supported the demand. Further, volume push by cement companies to meet calendar year-end target may help cement companies to increase sales volume during the quarter, according to analyst at Reliance Securities.
While the prices corrected by 1% MoM each in Western and Northern markets, prices remained flat in Eastern markets. Prices are expected to be hiked from current month as year-end targets prevented many companies to undertake price hike in Dec’17 so as to pass on recent spike in operational cost. Notably, all-India average price declined by around 2% YoY and around 3% QoQ in 3QFY18E, mainly due to significant price correction in Southern and Western markets. We expect price correction in 3QFY18E along with cost up-tick will take a toll on cement companies’ quarterly performance, the report said.