Shares of UltraTech Cement hit a seven-month high of Rs 4,334, up 3 per cent on the BSE, in the intra-day trade on Thursday on expectation of improvement in demand. The stock of the cement major was trading higher for the third straight day, ralling 7 per cent during the period and was trading at its highest level since March 6, 2020.
In the past three months, UltraTech Cement outperformed the market by gaining 14 per cent after the company reported better-than-expected operational performance in the April-June quarter of FY21 (Q1FY21). In comparison, the S&P BSE Sensex was up 11.3 per cent during the same period.
The company reported a consolidated EBITDA (earnings before interest, taxes, depreciation, and amortization) of Rs 2,353 crore, as against an average analyst estimate of Rs 1,702 crore. Ebitda margins improved to 31 per cent from 27 per cent in the previous year quarter. A volume decline of 22 per cent year on year (YoY) at 14.65 MT was also better than analyst estimates of around 34 per cent.
Analysts, now, opine that the cement industry demand is slowly improving from the disruption created from Covid-19 due to pent up demand and improved rural demand.
CARE Ratings believe rural demand will be the major driver for cement considering monsoons have been favourable in most part of the country and the outlook for Kharif crop too looks promising. This could translate in an inflow of cash in the rural economy which could commensurate in infrastructure creation, thus, augmenting cement demand. On the flipside demand for the commodity has been subdued in urban India.
India's cement industry has shown resilience amid the phase-wise opening up of the economy in a seasonally weak quarter. The volume recovery seen in May and June, driven by strong demand from the rural and semi-urban areas, has largely sustained in 2QFY21 (adjusted for monsoon seasonality).
"2QFY21 is seasonally the weakest quarter of the year due to heavy monsoon rains across most parts of the country. Accordingly, we have seen cement demand decline on a MoM basis since July even this year. However, on a YoY basis, demand recovery seen in June has sustained even in this quarter – a positive for the sector outlook," Motilal Oswal Financial Services said in sector update.