Stock Market today: UltraTech Cement, Ambuja Cements, ACC, Orient Cement , The Ramco Cements share prices gained up to 14% on Monday. Shree Cements, Dalmia Bharat and few others share prices also gained up to 2%.
Cement stocks remain in focus on rising capacities and ongoing consolidation in the Industry. The Cement demand also remains strong and expectations on volume growth are also firm. The consolidation in the Industry is further likely to help support market share gains.
All this has added to gains for UltraTech Cement, Ambuja Cements, ACC, Shree Cements, India Cement share prices that are up 15-55% in last one year
While longer term outlook remains strong, In the near term some challenges may be faced. One reason in pressure on cement prices being witnessed in the industry.
Cement prices have started to dip in June’2024. The channel checks by Jefferies India Ltd indicate that average Cement prices dipped further in June led by 1-1.5% month on month, ending the quarter on a low. The first quarter average cement prices are 2-2.5% lower sequentially as per Jefferies
The same can put pressure on margins and earnings, though cement manufacturers may try to benefit from the operating leverage looking at targeted volume growth in the seasonally strong quarter . The demand in the month of April and May remains strong, led by pick up in construction activities.
Analysts at Jefferies India Pvt Ltd in their report highlighted that industry volume growth has staged a recovery in May-June on a year on year basis, after weak April. The volume push is likely to have remained high.
Analysts feel that in order to gain market share and volumes, manufacturers may not have remained aggressive on pricing.
As we move forward the onset of monsoon season means lower chances of price improvement since construction activities get impacted by rains.
Analysts thereby watchful, feel price hikes may only happen by end of September Quarter.
Jefferies said that Dealers suggest price hike possibility is limited for next 2 months, amid monsoons. Weak prices and sequential negligible volume operating leverage may likely weigh on margins in the first quarter, partly offset by softer variable cost and company’s cost saving initiatives.
Analysts at Systematix Shares and Stocks post Q4 results a few days back had said that prices pan India have corrected 5% since March with an anticipated 15-20% dip in demand from Q4FY24. Elections, excessive heat and the upcoming monsoon ensure prices are unlikely to rise over the next two quarters they had added.
Even analysts at Prabhudas Lilladher as per their monthly channel checks in June said that there is no expectation of immediate price hikes as demand remains muted and upcoming monsoon expected to keep construction activities on light side. They expect demand to improve gradually post monsoon followed by price hike announcements by companies in 2HFY25 checks on
Thus as one needs to remain watchful on near term trend, the outlook on longer term is strong. A majority of analysts believe that the cement industry will see a swift recovery despite the short-term slowdown and the ensuing price pressures. This recovery will be driven by strong demand in the infrastructure, housing, and commercial segments, benign input prices, an increasing emphasis on modernization, system efficiencies, and cost savings.
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