Most of the company managements' continue to be positive on the cement demand, led by the government’s thrust on infrastructure projects, pick-up in urban real estate, and likely recovery in the rural segment.
On outlook, HeidelbergCement India in their investor presentation said the cement demand from government projects is expected to increase in 2023, as a 33 per cent increase in infrastructure development capex (Rs 10 trillion) in a pre-election year argues well for cement consumption.
The increase in cement capacities to keep the sector utilization levels range-bound. Further, GST council (fitment committee) may consider revising 28 per cent GST on cement, the company said.
Meanwhile, cement prices remain stable from December 2022-exit and no price hike has yet been witnessed. However, improvement in capacity utilization is likely to support price hike in the near term. Fuel cost for most of the companies is expected to remain flat to marginally lower in Q4, given the volatility in petcoke prices (currently hovering in the range of $170-185/t vs average price of $182-185/t in 3QFY23), analysts at Motilal Oswal Financial Services said.
Among the individual stocks, UltraTech Cement gained 3 per cent to Rs 7,390.95, hitting a 52-week high in intra-day trades, after the company announced commissioning of 1.30 MTPA brownfield cement capacity at Hirmi, Chhattisgarh and 2.80 mtpa greenfield grinding capacity at Cuttack, Odisha. The stock surpassed its previous high of Rs 7,389.95, touched on January 18, 2023.
With this commissioning the company’s total cement manufacturing capacity in India is now at 126.95 MTPA. This forms part of the ongoing capacity expansion of phase one.
UltraTech may further rise to ~154mt by FY25E under Phase-II which should propel volume growth and market-share gains. Analysts at Emkay Global Financial Services have ‘BUY’ rating on the stock, given that the company’s extensive pan-India presence, premium brand positioning, and focus on cost efficiency make it better placed to improve its margin in the medium term.
Ambuja Cements was up 2 per cent to Rs 355.90 after the company said it has been declared as the ‘preferred bidder’ for the Uskalvagu limestone block in an e-auction conducted by the Government of Odisha. The block is situated in Malkangiri District, Odisha over an area of ~547 hectare with estimated limestone resource of ~141 million tonnes having average CaO content of 43.7 per cent.
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