Cement shares on a roll; ACC, Ambuja, UltraTech, JK Lakshmi hit new highs

Cement shares traded higher between 3 per cent and 9 per cent on the BSE as compared to a 0.63 per cent decline in the S&P BSE Sensex.

Shares of cement manufacturers were on a roll, in an otherwise weak market, on Tuesday. Most of the frontline companies' stocks were trading higher, hitting new highs on the BSE in the intra-day trade after ACC and Mangalam Cement reported healthy results for the quarter ended June 2021.

UltraTech Cement, ACC, Ambuja Cements, Birla Corporation, JK Lakshmi Cement, Sagar Cements, Shree Digvijay Cement and The Ramco Cement hit their respective new highs and traded higher between 3 per cent and 9 per cent on the BSE. In comparison, the S&P BSE Sensex was down 0.63 per cent, or 331 points, at 52,223 points at 12:47 pm.

Shares of ACC, for instance, hit a new high of Rs 2,338 as they rallied 9 per cent on the BSE in the intra-day trade today after the company reported strong operational performance for the second quarter ended June 2021 (Q2CY21). The company’s Ebitda (earnings before interest, taxes, depreciation, and amortization) margins expanded 233 basis points (bps) quarter-on-quarter (QoQ) to 22.4 per cent due to higher realisations. On a year-on-year (YoY) basis, Ebitda margins improved by 200 bps from 20.8 per cent in Q1CY20. READ ABOUT IT HERE

The company’s net sales during the quarter increased 51 per cent YoY at Rs 3,810 crore over the previous year quarter. Ebitda during the quarter was up by 65 per cent YoY at Rs 869 crore. The profit after tax (PAT) more-than-doubled to Rs 569 crore from Rs 271 crore in the corresponding quarter of the previous year.

The management expects strong demand recovery led by the government’s focus on large-scale infra projects and affordable housing, coupled with a revival in industrial capex, driven by the implementation of the Production-Linked Incentive scheme.

"Amid concern over higher cost pressure, the company managed to improve its margins during the quarter backed by higher realisations while sales volume broadly remained in line with our estimates. Overall, the performance has remained better than our estimates," ICICI Securities said in a note.

Meanwhile, shares of Mangalam Cement too hit a new high of Rs 458.90, up 10 per cent in the intra-day trade today, having surged nearly 17 per cent in the past two trading days. The company, on Sunday, July 18, had reported 189 per cent YoY jump in its net profit at Rs 39.94 crore in June 2021 quarter (Q1FY22), as against Rs 13.80 crore in the year-ago quarter. Revenue from operations grew 57 per cent YoY at Rs 355 crore.

COMPANY	LATEST	PREV CLOSE	GAIN(%)
ACC	2330.15	2150.65	8.4
Sh. Digvijay Cem	94.65	87.70	7.9
JK Lakshmi Cem.	704.25	659.90	6.7
Mangalam Cement	442.95	417.55	6.1
Andhra Cements	28.05	26.75	4.9
Ambuja Cements	404.50	385.90	4.8
Saurashtra Cem.	100.25	95.90	4.5
Birla Corpn.	1395.00	1334.90	4.5
Anjani Portland	504.90	485.95	3.9
Sagar Cements	1163.00	1126.35	3.3
Sanghi Industrie	62.05	60.20	3.1
Prism Johnson	143.95	139.70	3.0
India Cements	197.75	192.45	2.8
UltraTech Cem.	7506.35	7312.00	2.7
NCL Industries	265.95	259.60	2.5
Star Cement	114.55	111.90	2.4
Heidelberg Cem.	269.25	263.55	2.2
Orient Cement	152.05	148.95	2.1

The cement industry players seem to be cautiously optimistic on the impact of second wave of Covid-19 on the cement industry. The demand-supply scenario in Q1-FY22 in particular was affected owing to the recent spike in Covid-19 caseload and consequent imposition of restrictions from April 2021 onwards that slowed down the construction activities and in turn led to fall in demand for the commodity. In addition to this, growth in rural demand had aided the demand for cement in the last fiscal year. However, that may not be the case this year as rural areas too seem to be affected due to the second wave of Covid-19, CARE Ratings said in July month sector update.

While states have started lifting restrictions in a phased manner from June onwards, demand is expected to gain traction on a gradual basis and will be driven primarily by government spending on infrastructure coupled with pick-up in demand from both rural and urban markets as the situation evolves based on the containment of the virus and the progress in the vaccine inoculation drive. However, it is to be noted that the possibility of a third wave of Covid-19 in the near future might affect the industry dynamics again, CARE Ratings said.