Cement shares hit 52-week highs

Dalmia Bharat, Deccan Cements, Mangalam Cement, Birla Corp, Sagar Cements and Ramco Cement hit 52-week highs.

Shares of cement makers such as Dalmia Bharat, Deccan Cements, Mangalam Cement, Birla Corporation, Sagar Cements and Ramco Cement have touched their respective 52-week highs on the BSE.

UltraTech Cement, ACC, Ambuja Cements, India Cements, Sanghi Industries, Shree Cement, HeidelbergCement India and JK Lakshmi Cement are trading near their 52-week highs.

Deccan Cements, the largest gainer in the cement pack, has rallied 13% to Rs 1,030, also its record high on the BSE.

In the past nine trading sessions, since June 15, the stock surged 24% from Rs 828 after the credit rating agency ICRA upgraded the ratings of the company’s bank loan facilities. The S&P BSE Sensex was down nearly 1% during the same period.

“The upward revision in the ratings factor in the improvement in the operational and financial performance of the company during FY2016 on account of higher cement sales volumes and higher cement realizations supported by pricing discipline and revival in demand. This enabled the company to improve the capacity utilization, pass on the increase in the input costs, thus translating into improved OPBIDTA/MT, earnings, capital structure and coverage indicators,” ICRA said in a release.

Going forward, the demand which was earlier adversely affected due to unrest in erstwhile Andhra Pradesh (AP) is now expected to improve given the new infrastructure/project announcements in both AP and Telangana. However, operating profitability critically hinges on the ability of the company to pass on relatively high freight costs and power & fuel costs, it added.

Dalmia Bharat too hit a record high of Rs 1,205 on the BSE in intra-day trade. Post March quarter results, the stock rallied 29% against 3% rise in the benchmark index.

The company said it witnessed improved cement demand since second half of FY16 and expect rural demand to gain momentum in addition to the infrastructure growth.

Analysts at IIFL Institutional Equities expect profitability for the frontline cement companies to improve for the next 2- 3 years, led by improved pricing power, as incremental capacity is likely be lower than incremental demand growth.