Jefferies suggests buying these 2 midcap cement companies as players seen to post recovery in H2FY25

Cement stocks in Monday's session were on the rising trend as the cement prices were increased across regions in the December quarter. As per Zee Business research inputs, the price was increased between Rs 7-15 per bag. 

Also, the demand from rural areas remains robust in the second half of the current fiscal year 2024-25 on the back of better Kharif output as well as improved farm cash flow.

Furthermore, the sector is set to be buoyant with the government's capex pegged at a huge Rs 11.1 lakh crore. 

In the backdrop, shares of cement companies traded with gains of nearly 7 per cent at the last count. Sagar Cements ( up nearly 7 per cent), JK Cement ( up over 5 per cent), UltraTech Cement (up over 4 per cent) and Dalmia Bharat (up more than 3 per cent). 

Jefferies on cement space

Providing more clarity on the current dynamics in the cement industry, global brokerage Jefferies highlighted that cement prices saw muted growth month-on-month in November, with prices surging around 1-2 per cent quarter-on-quarter in the December quarter. 

It added that a hike in cement price of between 2-3 per cent is needed to meet estimates.

Also, the brokerage noted that dealer interactions suggest that price declines have bottomed out and industry is targetting Rs.10-15/bag hike in December.

Pencilling in 8-10 per cent YoY volume growth in 2HFY25 in comparison to flat growth in 1HFY25. Recovery likely in Q4 on revival in the government capex, it added.

Furthermore, the brokerage highlighted that the cost trend of petcoke prices which though at a slightly higher side month-on-month at around USD95/tonne, remains below  the USD100/T level seen until Sep-24.

In addition, for 3QTD, spot average prices are lower by 12 per cent/ 26 per cent QoQ/YoY