Cement shares in action: Heidelberg, UltraTech, Shree, Nuvoco zoom up to 4%

Cement shares in focus: Cement stocks shone brightly on Wednesday, December 11, 2024, as the sector saw a major rally, with shares surging up to 4.5 per cent during intraday trading on the BSE. 

 

The renewed investor interest in the cement shares came on the back of reports that cement dealers have initiated price hikes since the start of December. This marks a change after nearly five months of flat pricing, which had strained dealer margins and dented the profitability of manufacturers.

 

Dealers cited multiple factors driving the price increases. An uptick in demand from the real estate sector, boosted by improved labour availability post-festive season, played a major role, the report said. Additionally, rising infrastructure orders further fuelled the need for cement, creating a favourable market dynamic.

 

 

As the trading day unfolded, several cement stocks stood out with solid gains. By 9:55 AM, HeidelbergCement led the pack, soaring 4.34 per cent to hit an intraday high of Rs 230.65. Udaipur Cement Works followed closely, climbing 4.19 per cent to Rs 32.30, while Star Cement gained 3.74 per cent, reaching Rs 202.20. Nuvoco Vistas rose 3.32 per cent to Rs  380.45, and UltraTech Cement, the industry heavyweight, advanced 2.65 per cent to Rs  12,057.50.

 

Other top performers included Dalmia Bharat, which edged up 2.60 per cent to Rs 1,946.40, and The Ramco Cements, up 2.34 per cent at Rs 1,037.60. JK Cement recorded a 2.32 per cent rise to an intraday high of Rs 4,711, while Orient Cement moved up 2.22 per cent to Rs 349.25. ACC increased 1.93 per cent to Rs 2,293.30, Ambuja Cements gained 1.83 per cent to Rs 584, and Shree Cement, one of the pricier stocks in the segment, added 1.76 per cent to Rs 27,550.60.

 

In a note dated December 9, analysts at Nuvama highlighted a mixed trend in cement prices during November 2024. While prices saw an upward movement in the East and North, they remained relatively stable in other regions. December, however, has brought further price hikes across several areas, though the long-term sustainability of these increases remains uncertain.

 

The subdued demand in November was attributed to seasonal factors such as festivals, labour shortages, and extreme weather conditions. Looking ahead, the analysts expect demand to recover as capital expenditure by central and state governments is likely to gain momentum, following a sluggish first half of FY25.

 

“We believe prices have bottomed out; however, the chances of any substantial price hikes in the near term remain bleak due to elevated competitive intensity. We reiterate our neutral stance on the sector. JK Cement (Buy) remains our top pick,” Parvez Qazi and Shrey Mehta of Nuvama said.  "We understand that there have been several attempts for price hikes in the last few months, but the hikes have not been absorbed in the markets. If these price hikes get absorbed in the markets, the full impact would be visible in Q4FY25. Though the pricing environment remains uncertain in near-term, we believe that the prices are likely to improve gradually in the medium-term as the demand is expected to pickup," ICICI Securities said in note.

   

Meanwhile, G Chokkalingam, founder and head of research at Equinomics Research said that the short-term indicators for the cement sector are positive but not exceptional, especially considering the below-than-expected GDP growth. Also, Northeastern monsoon could impact cement demand in Q3 in southern states. 

 

On the investment strategy, Chokkalingam said, “Investors should consider waiting another quarter or two before investing in these stocks. However, the medium to long-term outlook remains promising.”