• Miki

As demand for cement increases, the top stock picks include Ultratech and Shree Cement.



Top Picks in the Cement Sector: The building materials sector, which includes ceramics, paints and adhesives, pipes, wood panels, cement, and steel, has seen challenges over the previous few quarters, including rising interest rates and increased cost pressures. In recent months, it has also witnessed two significant events. One is the announcement by Adani Group that it will purchase Ambuja and ACC, two businesses owned by Holcim India, for about $175 per tonne. The second is that Ultratech has declared it will spend Rs 128 billion to boost capacity by 22.6 million tonnes (at a capital cost of USD75 per ton). Cement companies suffered a 30% decline from highs as a result, ranking among the worst-performing equities for the past week.

However, according to ICICI Securities analysts, demand is expected to significantly rise in June 2022, driven by factors like as the pre-monsoon push, a pick-up in infrastructure projects, lower pricing for materials like steel and cement, and better labor availability.


The brokerage firm stated in a report that "the month might witness an increase in the mid-teens, both MoM and YoY, reflecting 6% volume CAGR on a 3-year basis. The industry may experience its second-highest volumes in Jun'22, after its peak in Mar'22, in the previous seven months, with pan-India utilization at almost 78%. While only Rs 10–15/bag has been reversed in the West in YTDQ1FY23, Rs 35–40/bag out of the Rs 50–55/bag price rise announced in mid-Apr'22 appears to have been removed in the North, Central, and East. Price increases are expected to be announced soon, while prices in the South have remained largely steady QoQ in Q1FY23-TD. We think businesses may absorb cost increases quarter over quarter even in Q1FY23E and that average EBITDA/te is unlikely to decline quarter over quarter (though it could continue to decline YoY).

Considering the short-term triggers for the cement industry, the note noted that "(a) Asset-based valuations are attractive at around the long-term average-1SD after >40% stock price correction over past seven months; (b) any sharp reduction in fuel costs; (c) price increase in South: with South entering a seasonally weak period of monsoon that lasts until Dec'22, the region would be left with no choice but to raise prices any time soon, in our view; and (d)


Top Cement Sector Picks


Shree Cement (SRCM) and Ultratech Cement (UTCEM) continue to be ICICI Securities' top recommendations, according to the firm's note.

Ultratech Cement (UTC)


At 12:03 p.m., the market price of UltraTech cement is Rs 5,433 per unit, up 0.08 percent. The stock's 52-week high and low has been reached at Rs. 8,269 and Rs. 5,410, respectively.


For the quarter ending March 31, 2022, the company reported an increase in its total net profit of 47.6% YoY to Rs 2,620 crore. Furthermore, it has a strong dividend track record and has routinely declared dividends over the past five years.


The stock has a "BUY" recommendation from ICICI Securities, with a target price of Rs. 8,500.


Shree Cement (SRCM)


As of the time, the report was written, the stock's current market price, or CMP, was Rs 19,233.30 per share. The 52-week high and low prices for the stock are, respectively, Rs. 31,469 and Rs. 19,080. The business has a solid history of paying dividends, and during the last five years, it has done so without fail.

The company has a promising future because it is using shareholders' money wisely and improving ROE. It reported that its standalone net profit for the fourth quarter that ended on March 31 fell by 16% to Rs. 645 crores. The revenue has increased by 15% from the previous quarter's Rs 3,552 crore.


The stock gets a "BUY" recommendation from ICICI Securities with a target price of Rs.27,000.


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