Cement shares in focus; ACC, UltraTech, Ambuja Cements gain up to 5%

Shares of cement companies have rallied up to 12 per cent on the BSE in the intra-day trade on Wednesday on the expectation of improvement in earnings due to lower operational cost.

UltraTech Cement, ACC, Ambuja Cements, Orient Cement, India Cements, Ramco Cements, JK Lakshmi Cement, Shree Cement and Heidelberg Cement India were up 3 per cent to 6 per cent on the BSE. In comparison, the S&P BSE Sensex was up 1 per cent or 375 points at 36,349.

In the October-December quarter (Q3FY19), the volume growth for the cement industry remains robust at 10 per cent year-on-year (YoY) and 11 per cent on quarter-on-quarter (QoQ). The past year’s industry growth was 16 per cent YoY. The cement companies reported lower-than-expected Ebitda (earnings before interest, taxation, depreciation and ammortisation) due to lower realization in Q3FY19.

Analysts at Elara Capital expect cement industry cost pressures to subside due to softening in fuel cost. On the pricing front, South India has seen a sharp increase in prices in February. This should bolster earnings in the upcoming quarters.

The cement prices in South India have inched up by Rs 40-50 per bag effective from February 2019. There is a price hike of Rs 5-10 per bag in East India, while in North India. There is a price hike of Rs 10-12 per bag effective from February 6, 2019.

The petcoke prices peaked out by the end of Q2FY19 and started falling in Q3. The benefits could not be reflected in Q3FY19 financials because of the use of high-cost inventory but will be reflected from Q4FY19.

“Thus, we believe South India-based companies, such as Orient Cement and India Cement, are likely to outperform in the near term while in the long run, firms with a presence in Central, Northeast India and North India are like to outperform due to better demand-supply situation,” the brokerage firm said in sector update.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
DECCAN CEMENTS	405.80	361.90	12.13
SANGHI INDS.	57.00	53.45	6.64
PRISM JOHNSON	78.40	73.60	6.52
UDAIPUR CEMENT	13.79	12.95	6.49
ORIENT CEMENT	73.35	69.15	6.07
INDIA CEMENTS	90.80	85.70	5.95
THE RAMCO CEMENT	685.40	648.70	5.66
ACC	1456.45	1384.20	5.22
JK LAKSHMI CEM.	328.00	315.30	4.03
NCL INDS.	124.00	119.45	3.81
BIRLA CORPN.	478.40	461.65	3.63
MANGALAM CEMENT	215.45	208.15	3.51
HEIDELBERG CEM.	153.60	149.05	3.05
AMBUJA CEM.	218.40	212.05	2.99
SHREE CEMENT	17048.25	16575.50	2.85
CENTURY TEXTILES	818.70	797.25	2.69
ULTRATECH CEM.	3887.15	3786.55	2.66
SAURASHTRA CEM.	39.50	38.55	2.46
STAR CEMENT	98.85	96.60	2.33
SHIVA CEMENT	14.13	13.88	1.80