Stock of this smallcap cement company has zoomed 64% in one month

Shares of Mangalam Cement hit a new high of Rs 694.40 as they surged 16 per cent on the BSE in Friday's intraday trade, extending their rally on healthy financial performance.

In the past one month, the stock of the smallcap cement manufacturer, which operates majorly in Rajasthan, Uttar Pradesh & Madhya Pradesh, has zoomed 64 per cent. Moreover, since October, the market price of the company has soared 76 per cent after it reported solid numbers for the quarter ended September 2023 (Q2FY24).
 

For the period, it reported a standalone net profit of Rs 11.79 crore, as against a loss of Rs 27.11 crore last year. For the first half of FY24, it posted a 27-fold jump in net profit at Rs 26.48 crore as against a profit of Rs 0.98 crore in the same period last fiscal.

Meanwhile, in the past couple of quarters, the promoters of Mangalam Cement have steadily increased their stake in the company. For instance, shareholding pattern shows that, in the September quarter, promoter holding in the company increased to 36.32 per cent from 34.36 per cent seen at the end of the June quarter, and 31.96 per cent at the end of the March quarter.

Sector outlook
The government's thrust on 'Atmanirbhar Bharat' and 'Make-in-India' initiatives, and the overall expansion of the industrial sector shows a strong potential for increase in cement demand and consumption in the medium term.

The government allocations for creation of safe housing, clean drinking water and sanitation, and significant road connectivity, among other initiatives in the Union Budget of FY2023-24 (FY24) will also lead to increase in the expenditure on infrastructure projects.

Given this, Mangalam Cement, in its FY23 annual report, said that the growth in cement volumes for FY24 is expected to be around 9 per cent and total quantity is expected to increase to 440-450 MMT/year for FY25.

According to Care Ratings, the current upcycle in infrastructure and real estate is expected to significantly boost cement demand. The macros of the cement industry remain stable in the long term, driven by demand from the housing sector, upcoming infrastructure projects as well as generous rural demand. The capex spree by the government on infrastructure and housing spend in the wake of the 2024 general election paints an encouraging picture of cement demand.

"The private capex is also expected to pick up gradually lending further support on the demand front. The cement players have also responded enthusiastically by announcing huge capacity additions over FY23-FY25. With several companies looking to commission capacities in the next two years, the industry's pricing may come under some pressure," the rating agency had said in its rationale.