Domestic cement firms saw a sharp uptick in realisations in the course of the April-June quarter, offsetting the escalations in the energy/fuel and freight charges, according to domestic brokerage and study firm JM Financial. Realisations had been up 7% on-quarter basis against the anticipated 4% rise, driven by cost hikes and modify in the mix. “As a result, EBITDA/t fared better on-quarter to Rs 1,359 (+15% QoQ), as a rise in realisations more than offset costs,” the brokerage report stated. “We expect the power/fuel costs to continue to rise in 2Q sequentially as the increased impact trickles into the numbers,” JM Financial added.
In terms of stock choosing, analysts at JM Financial stated that cement stocks have rallied and are now sitting at higher trading multiples. “We continue to maintain positive stance on companies prioritising growth along with sharp focus on profitability as a strong demand undercurrent is visible,” they added.
Ultratech Cement
Target cost: Rs 8,000
The enterprise saw volumes recover in June with utilisation going sturdy in the North. The management of Ultratech Cement believes that going forward, infra projects and the rural segments will continue to drive the demand for cement. Capex initiatives stay sturdy with the enterprise getting invest almost Rs 10 billion on capex in the course of the initial quarter. Further, Ultratech Cement has planned aggressive expansion at a somewhat low capital price. Currently, the stock trades at Rs 7,425 per share, implying a 7.7% upside from existing levels.
Dalmia Bharat
Target cost: Rs 2,400
Realisations for Dalmia Bharat had been up 7.9% on quarter basis at Rs 5,284 per tonne. The enterprise is targeting a predictable development of 15% CAGR more than next 10 years. It intends to expand to develop into a pan-India player with capacity expansion, the report stated. Dalmia Bharat plans to expand capacity to 110-130MTPA by monetary year 2029-30. The enterprise has also planned to use 10% of OCF towards shareholders’ returns. On Wednesday, the stock was trading at Rs 1,996 per share, translating to a 20% upside prospective from existing levels.
JK Cement
Target cost: Rs 3,500
In terms of volumes, JK Cement saw slight moderations in July and August owing to the monsoon season, when costs have corrected by Rs 5 – 6 per bag on typical with larger correction in the Southern area. JK Cement began executing their 4MTPA expansion at Panna, MP along with a split grinding unit of 2MTPA at Hamirpur in UP. “The total outlay for the project is envisaged at Rs 29.7bn (including land). The projects are expected to be funded through Rs 17bn of debt at subsidiary level and Rs 13bn of equity infusion by JK Cement,” JM Financial stated. The stock was up at Rs 3,184 per share on Wednesday. For it to attain the target cost, JK Cement stock will need to have to surge 10% from the existing cost.
JK Lakshmi Cement
Target cost: Rs 790
JK Lakshmi Cement’s management expects to do a volume development of 10-11% in the monetary year 2021-22. Demand did show indicators of improvement among the initial week of June and the second week of July just before monsoons arrived. The enterprise stated that July costs had been steady in East and Gujarat when experiencing stress in North. Prices are anticipated to rise by Rs 25/bag post-monsoon. In terms of capex, the enterprise plans an expansion of 2.5MTPA in Udaipur Cement Works (UCW) at an estimated price of Rs 14bn, to be funded by way of a 70-30 mix of debt and equity. The stock trades at Rs 699 per share, implying a 13% upside from existing levels.
(The stock suggestions in this story are by the respective study and brokerage firms. TheSpuzz Online does not bear any duty for their investment suggestions. Please seek advice from your investment advisor just before investing.)