Cement stocks on new high after reports of price hike

Stocks of cement companies like Ultratech, Ambuja and Shree Cement touched a new high today on reports of price hike and a positive sector outlook by Credit Suisse. Cement companies have hiked prices by about Rs 5-6 per 50 kg bag to pass on the impact of recent hike in diesel price.

Stock price of Shree Cement touched a new high of Rs 3,763.30 on the Bombay Stock Exchange and closed at Rs 3,671.05, up 1.37%. Ambuja Cement touched a new high of Rs 203 and closed at Rs 202.40, up 3.90%. Ultratech touched a new high of Rs 1891.90 to close at Rs 1875.10, up 2.17%. Most cement stocks gained 4-5% on an average.

‘Our recent channel checks suggest that cement prices continue to surprise positively and have declined only 2% versus our expectation of a 4% decline in the September quarter,” the Credit Suisse report said.

According to the brokerage, cement majors (ACC, Ambuja, Ultratech) which account for 32% of total industry capacity, have seen utilisations improve since FY11 and are operating above industry averages with net cash balance sheets, which continues to position them favourably.

The industry's pricing power has also been aided by factors such as lower breakeven points of cement majors, and production discipline, which increasingly appears likely to be sustained.

V Srinivasan, research analyst with Angel Broking said the reports have price hike today has caused a sentimental rally. “Prices went down in August due to monsoon but now a trend reversal is expected”, he said.