Cement stocks firm up on price hike

Cement stocks have gained ground in today's trade on reports that cement companies have gone ahead with a price hike in the range of 3-30% across various regions.

Some of the major gainers were Shree Cement, Prism Cement, Mangalam Cement, India Cements, Heidelberg Cement, all up 4-8%.

Birla Corp, ACC, Ambuja Cement and Ramco Cements added a pecent each.

Post a dip in morning trades after Citigroup recommended a sell on UltraTech Cement for a target price of Rs 1,620, the stock is now up 0.5% at 1200 hrs. Citi expects the EBITDA per tonne to contract Rs 1,015 in FY14.

In a recent report on cement sector, Prabhudas Lilladher expects the sector to show strong growth in earnings H2FY15 onwards. We see strong demand with high double digit growth in FY17, aided by unleash of pent up demand and improvement in economy.

Given this backdrop, we like ACC on the back of attractive valuations and play on improved operations, Ultratech and Shree cement, driven by strong quality of operations, While in mid caps, we like Ramco cement and JK Lakshmi cement.

The report futrther adds, the cement demand has been at a 13 year low at around 4% and is expected to grow at 9% in H2FY15/FY16 on the back of revival in sentiments and unleashing of pent up demand against the dismal growth of 6% in FY1014.