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