Cement Sector,
According to domestic brokerage and research firm Sharekhan by BNP Paribas, major players like UltraTech, Shree Cement, The Ramco Cements, and Dalmia Bharat have underperformed their peers and the Sensex over the past three months. quit it.
Dalmia Bharat, UltraTech Cement, The Ramco Cements, and Grasim Industries remained the brokerage’s preferred picks.
However, the brokerage has given Shree Cement a “Low” rating because of its higher valuations and poor risk-reward ratio, which is led by a “Hold” call on JK Lakshmi Cement.
The cement industry is anticipated to continue riding on a healthy demand environment in the medium term, aided by a pick-up in government spending ahead of elections, the government’s continued focus on infrastructure development, and sustained demand from the residential housing segment. The demand environment is healthy with low P&F costs and favorable wind.
The brokerage anticipates that future capacity additions will be absorbed by a healthy demand environment, and that capacity utilization will generally remain flat. Additionally, if cement prices remain stable to positive territory, a decrease in domestic and international pet coke/coal prices starting in Q3FY2023 is anticipated to enhance operating profitability in terms of EBITDA/tonne during Q4FY2023 and Q1FY2024.
Concrete interest driven by the non-exchanging portion is additionally expected to fill in single digits during Q4 FY2023 as government spending on foundation and IHB lodging request is supposed to areas of strength for stay.
“Overall, the outlook for the cement industry remains positive on account of healthy demand and expected improvement in operating profitability on account of expected fall in power and fuel costs, provided the industry capitalizes on the benefits of lower cost share,” the note stated. “Overall, the outlook for the cement industry remains positive on account of healthy demand.” doesn’t pass.”
“Due to a weak pricing environment in South India, our channel analysis suggests that pan-India cement prices are set to decline in March 2023. It stated, “The southern region is experiencing a decline of 3% mom, while other regions are experiencing a decline of 1.5% mom.”
The brokerage believes that higher volumes and a weaker pricing environment will result from the financial year-end closure in March 2023.
The brokerage says that a weak macroeconomic environment and rising costs for power, fuel, and freight will be key risks that will hurt profitability.
