Cement companies shares close up to 8% higher on Wednesday: Analysts decode the surge in cement stocks

Cement Stocks: On the back of multiple triggers, the cement companies' shares defied the market's negative sentiment on Wednesday and rose up to 8 per cent on the exchanges by the end of the session.  

Individually, Shree Cement shares jumped most by over 8 per cent to close at Rs 23,452.65 a share, followed by JK Lakshmi Cement shares up over 6.5 per cent to close at Rs 489.9 apiece on the BSE. 

Similarly, UltraTech Cement and JK Cement shares each ended today’s session between 4-5 per cent higher to Rs 6767.95 and 2835.50 apiece, while The Ramco Cements, Ambuja Cements, and ACC each closed around 2-3 per cent to Rs 774, Rs 489 and Rs 2406 apiece, respectively, on the BSE. 

Analysts believe today’s surge in the cement stocks was mainly on key factors such as price hikes, petcoke cooling off, margins likely to bottom out in the second quarter of FY23 and anticipation of volumes as well as demand rise in the second half of the current fiscal. 

Cement stocks are on rise in anticipation of rising prices this quarter due to the mining ban at a few sites around the country, Kush Ghodasara, CMT, Independent Market expert said in a comment. Even the government spending on infrastructure has been boosted which could hike cement demand, he said, recommending to go long on ULTRACEMCO for targets of Rs 7400 with a stop loss of Rs 6400 for the next 2 months. 

While the long-term story of Indian cement companies remains intact amid massive infrastructure outlay, near-term uncertainties about a change of management among others could cloud valuations, another market analyst Tanusree Banerjee, Co-Head of Research Equitymaster, said in a note. 

Cost pressure is expected to ease in coming quarters as the global petcoke prices have corrected by around 40 per cent in the past 4 months, a domestic brokerage firm Emkay Research said in a report.  

Similarly, domestic petcoke prices have corrected by around 30 per cent in the past 3 months, it added, and said that the drop in fuel prices would offer cost savings for the cement companies from Q3FY23.