Cement stocks were in focus today as ACC, Shree Cement, JK Cement, Ramco Cement, Dalmia Bharat among others hit their respective 52-week highs. Analysts at Nirmal Bang said that the cement prices were strong in November 2020 due to pick-up in demand in the non-trade segment (infra segment) and continuation of demand from the individual house building (IHB) segment. Last month, the cement demand was up in high double digits on a sequential basis and recovery in demand was spread evenly across regions.
Among other individual stocks Dalmia Bharat touched Rs 1,195.70, Grasim Industries Rs 908.35, ACC Rs 1,788.05, JK Cement Rs 2,100 and Ramco Cement Rs 899.95, as their 52-week highs. In comparison, BSE Sensex was up nearly one per cent at 44,580 levels. India’s cement companies (14 listed; 67% of the overall capacity share) reported consolidated volume growth of 5 per cent on-year in 2QFY21 led by sustained demand in rural and a gradual pick-up in the infra segment (improved labour availability). The push to the cement prices in the early part of the month (only in a small way of 2-3%) could not sustain as demand waned faster than expected with a sharper fall during and after the festive season.
Centrum Broking said that prices lost strength in the last fortnight of the month and reversed back to the lower levels. “The lacklustre demand was sighted due to lack of labour availability, local issues like panchayat elections, change in work process by state governments and fear of upsurge in COVID-19 cases,” it added. Lack of government enthusiasm in announcing infrastructure projects due to fund scarcity across regions with few exceptions continue to keep demand soft.
On the other hand, analysts at Elara Capital in monthly update said that the demand was healthy during the first 10 days of November but started to moderate around Diwali and post-Diwali uptick in construction activities in several pockets has been slow to date. “As per market intermediaries, cement firms may try to raise prices in December; however, considering volume push by select MNC firms to achieve year end target, sustainability would be a tall task,” it added. Elara Capital is positive on the sector and prefers firms with healthy business franchisees equipped with scalable capacity, strong brand acceptance, diversified regional mix and healthy balance sheet.
Nirmal Bang further added that All-India cement prices have increased by 2 per cent over the last one month, primarily driven by better demand and recovery in prices in central and western regions. West, south and central regions reported 2-3 per cent month-on-month increase while prices in the east region were flat. The Central region reported 3.2 per cent sequential growth in pricing as the Uttar Pradesh market was very strong. While non-trade segment demand and prices recovered further in November’20 due to higher demand from the infra segment.