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Cement companies’ shares have been on an upward trend for the past few weeks as investors are betting on economic revival and pick up in post-monsoon construction activities, supported by easing of lockdown restrictions.
Investors’ sentiments remain positive as the Indian government continues to focus on mega infrastructure projects, affordable housing and the companies’ pricing power being resilient despite multiple lockdowns. This is evident from the fact that companies have raised their prices in March, April and May. The price hike is attributed to higher input cost such as freight charges due to increased fuel price and packing costs.
Some big names in the cement space – ACC, UltraTech, Ambuja, HeidelbergCement India, Managalam – reported robust results in the past week. On Tuesday of past week, cement manufacturers’ share prices rallied and a few even hit new highs during intraday trade after ACC and Managalam reported their results.
Mangalam, ACC, Birla Corp were some of the top weekly gainers and its shares rose 13.8%, 9.78%, 9.62%, respectively.
Even smaller companies like Sahyadri Industries with a market cap of Rs 736 crore reported strong results on Thursday, with its net profit rising 38.15% to Rs 32.59 crore in the Apr-Jun quarter, compared with Rs 23.59 crore in the year-ago period. Its shares hit a 52-week high during intraday on Friday and closed 43.8% higher at Rs 770.3 on a weekly basis.
Another lesser known name in the industry Orient Cement also hit a new high recently. It has seen a steady increase in its sales and operating profit. It has maintained a strong operating profit margin of 24% in the past four quarters. Many brokerage firms have a buy rating.
A positive future outlook for the industry has also encouraged the fifth largest cement manufacturer by volume Nuvoco Vistas Corp to raise Rs 5000 crore through initial public offering (IPO) in the coming months. In its DRHP filing, the company has said it expects the cement demand of the infrastructure sector to rise to 27% by FY26.