5 Cement Stocks That Are On The Buy List Of This Top Broking Firm

Broking firm Emkay Global has come-out with its latest report on the cement sector. According to the brokerage cement prices improve and further hikes are likely in the coming months. Here are 4 cement stocks that the brokerage has a buy in its report on the cement sector.

Cement prices increased by 5%

According to Emkay's channel checks the average pan-India prices increased by 6% MoM (up 7-8% YoY) to an all-time high in Apr'22.

"On a MoM basis, average prices increased by 7-8% (Rs 25-30/bag) MoM in the North, Central and East regions and 2-3% (Rs10- 15/bag) in the South and West regions. Cement prices in most regions improved by Rs30- 50/bag (except South) in the first fortnight of Apr'22. However, it has been rolled back by Rs10-15/bag owing to inadequate demand support after a strong volume push in Mar'22. The South and West (especially MH) regions have underperformed in terms of price hikes owing to weak production discipline. Cement companies are likely to attempt another price hike (in range of Rs10-30/bag) across regions in coming weeks," the brokerage has said.

4 cement stocks that have a buy call from Emkay Global

The brokerage has a buy call on the stocks of Ultratech Cement, Sagar Cement, ACC, Birla Corp and Shree Cements. According to the brokerage industry volumes likely grew in low double digits YoY/decline in mid-teens MoM in Apr'22.

"YoY demand growth was aided by a low base as it was impacted by the second Covid wave. On a MoM basis, the decline in demand was marginally higher than historical trends owing to lower availability of labor on account of Rabi harvest and high temperatures. The South and West regions are likely to see demand growth in high-teens YoY owing to a low base, while other regions will see demand growth in mid-single digits," the brokerage has noted.

Input costs increase

According to Emkay Global, Input costs (coal/ imported petcoke) increased by 60-70% in the past few months due to an unfavorable geopolitical scenario. Additionally, diesel prices rose ~10% from mid Mar'22.

"Accordingly, variable cost/ton is likely to remain elevated in H1FY23, in our view. Sustenance of current input prices may result in ~Rs600/ton (~Rs40/bag) cost increase for the industry. Our analysis of the past two cost inflation cycles (FY11-12 and FY18-19) shows that cost increases were passed on within 3-4 quarters," the brokerage has said.