Cement shares in demand; ACC hits fresh 52-week high, Shree Cement up 6%

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Shares of cement manufacturers were in demand with many of the sector stocks trading higher in the range of 2 per cent to 6 per cent on the expectation of improved demand. Analysts expect the cement industry to witness positive growth in the second one half (October-March) of the present fiscal (H2FY21) led by strong demand from the sustainable rural business segment.


ACC rallied 6 per cent to hit a fresh 52-week high of Rs 1,670 on the BSE in the intra-day business. The inventory surpassed its preceding high of Rs 1,637, hit on October 22, 2020.



Shree Cement, too, surged 6 per cent, while Ambuja Cements, UltraTech Cement, Ramco Cements, Mangalam Cement, and Shree Digvijay Cement were up in the range of 2 per cent to 4 per cent on the BSE. In comparison, the S&P BSE Sensex used to be up 0.63 per cent at 40,397 points at 01:14 pm.


“The cement demand is strong led by rural retail which is led by a good monsoon. More than 50 per cent of rural districts have shown growth over their past few performances. This uptick in demand isn’t pent up demand as ascribed first of all. Urban demand may be coming back slowly. New capacity addition will slow down as very few limestone mines are to be had. Key drivers of demand are rural housing and infra,” said Dolat Capital in a recent outline.


For the July-September quarter, the sector giants UltraTech Cement and ACC reported strong operational performance. UltratTech’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) margin improved to 27.7 per cent from 21.8 per cent. EBITDA/tonne improved 30 per cent year-on-year because of advantage of cost rationalisation initiatives taken by the company in the preceding quarter. Analysts had expected EBITDA/tonne to enhance to 23.5 per cent YoY all over the quarter.


UltraTech expects demand for cement to grow on the back of the government’s thrust on infrastructure and the expanding rural economy. The recent policy measures announced by the Reserve Bank of India to strengthen the real estate sector will also aid demand, it said.


Analysts at Emkay Global Financial Services and products remain constructive on the sector as they expect clinker utilisation to enhance gradually. Though there was cost inflation in the first half i.e. April-September period (H1FY21), the brokerage firm believes that price hikes and volume improvement will help companies enhance profits.

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