India Cements gains 5%; hits highest level since January 2008

Analysts expect margins of cement companies to bottom out in Q3FY22, with likely recovery in demand and prices.

Shares of India Cements surged 5 per cent to Rs 257.60 on the BSE in Friday’s intra-day trade, extending their past two weeks-rally on the back of heavy volumes. In the past 11 trading days, the stock has soared 37 per cent from a level of Rs 187.80 on December 30, 2021.

The stock of the cement manufacture was trading at its highest level since January 2008. It had hit a record high of Rs 333 on December 14, 2007.

At 11:04 am, India Cements was up 4.5 per cent at Rs 256.10, as compared to a 0.59 per cent decline in the S&P BSE Sensex. A combined 7.5 million equity shares had changed hands on the NSE and BSE.

Since December 20, 2021, the market price of India Cements has appreciated by 47 per cent, after the company informed stock exchanges that billionaire investor Radhakishan S Damani (RK Damani), Gopikishan Shivkishan Damani & family increased their stake in the company to 22.76 per cent at the end of December 20, 2021.

Since March-end last year, they had acquired an additional 6.30 million equity shares or 2.03 per cent stake in India Cements via open market purchases, the company said had said.

As on September 30, 2021, RK Damani (11.34 per cent), Gopikishan Shivkishan Damani (8.46 per cent) and RK Damani & Gopikishan Shivkishan Damani (1.34 per cent) collectively held 21.14 per cent stake in India Cements, as per the shareholding pattern data. The company has not yet disclosed its December 31, 2021 shareholding pattern details.

Commenting on its outlook, India Cements in its FY21 annual report said that the new government in Tamil Nadu is expected to give a push to housing and infrastructure development.

"Further, Andhra Pradesh and Telangana governments have started implementing irrigation, road building and other infrastructure projects and new housing schemes. All these developments give room for cautious optimism for cement demand in the coming months," the company said.

“With demand recovering, companies have announced price hikes of Rs10-30/bag across regions for January 2022. However, absorption of the price hikes will be known in the next few days. Our checks suggest the industry may announce another price hike in the second fortnight to support the absorption of the first hike,” said Emkay Global Financial Services in a cement sector update.

The brokerage firm expects margins of cement companies to bottom out in Q3FY22, with likely recovery in demand and prices. Cost inflation should ease off from Q4 as input prices have declined 15-40 per cent from their recent peaks, it said.