Stocks to Sell: Weak March quarter results dampen mood as mid, small-cap cement stocks slip up to 4%; brokerage recommend Sell on JK Cement, Ramco Cements

Cement stocks such as JK Cement and The Ramco Cements declined up to 4 per cent on the BSE intraday during Tuesday’s session after reporting weak March quarter results. The impact of the same was also visible in the other cement firm shares from the mid and small-cap categories. 

Individually, JK Cement shares tumbled nearly 3 per cent to Rs 2373 per share, while Ramco Cement shares slipped 3 per cent to hit a new 52-week low of Rs 652 per share on the BSE intraday. 

JK Cement’s Q4FY22 standalone EBITDA was significantly lower than estimated led by lower-than-expected prices and higher costs, Kotak Institutional Equities said in its report, adding that the price hikes so far in Q1FY23E are inadequate to offset the cost pressures  

The brokerage expects margins to remain under pressure in H1FY23E and it slashes earnings factoring higher costs and trims the target to Rs 1,820 per share from Rs 2,000 earlier, while maintaining SELL ratings on expensive valuations. 

Similarly, for Ramco Cements, Kotak Institutional gives Sell call mainly on the same reason of margins likely to be under pressure. It said, “The company’s Q4FY22 EBITDA was marginally lower than estimated led by lower volumes.” 

The price hikes by the sector, so far, have been underwhelming against the cost pressures and margins are likely to remain under pressure in H1FY23E. It sees the stock price may go down by Rs 540 per share and cut earnings estimates. 

Coal and diesel cost inflation continues to remain a key area of concern for cement producers and spot pet coke and thermal coal prices have moderated from their peak nonetheless, and estimated 15- 20% fuel cost inflation to hit producers in 1HFY23E, the brokerage pointed out sector concerns. 

Among other cement sector stocks, Birla Corp, India Cements, and Dalmia Bharat shares dipped between 2-3 per cent on the BSE intraday, as compared to a 0.23 per cent fall in the BSE Sensex at around 2:00 PM.