These are Emkay's top stock picks in the cement sector

By Livemint
Cement industry margins are likely to contract QoQ in Q2FY22E, the brokerage said

As per brokerage firm Emkay Global’s view, cement companies have announced a price hike of Rs15-25/bag in the South and 10-15/bag month-on-month (MoM) in other regions in September in order to arrest any further price decline. The price hike is expected to be absorbed in H2 with a demand recovery and rising utilization levels.

In Q2FY22 till date, average pan-India prices have likely declined 3% QoQ. Prices have declined 1-2% QoQ in the North and Central markets, 3% in the West and 4-6% in the South and East regions. Historically, cement prices correct seasonally by 2- 3% QoQ in the second quarter of the financial year, the brokerage firm said in a note.

“The input cost inflation and seasonal correction in cement prices should keep margins under pressure in the near term. However, margins are likely to bounce back with demand/price recovery in H2FY22," it said. 

Emkay Global maintains a positive view on the cement sector based on robust earnings compounding and a structural RoIC reset, with medium-term demand growth visibility and calibrated supply additions. Its top stock picks are Ultratech, Shree Cement, and Ambuja Cement.

The channel check conducted by Emkay suggest that average pan-India prices declined 3% MoM in August 2021. The moderation in prices was primarily led by a 6% MoM decline in the East, while prices in other regions fell in the range of 2-3% MoM in August 21. On a YoY basis, prices were broadly flat in the North, West and Central regions, but they dropped 2-3% in the East and South regions, the brokerage note added.

The views and recommendations made above are those of individual analysts or broking companies, and not of Mint.


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