UltraTech, ACC , Ambuja Cements: Should you Buy, Sell or Hold cement stocks ahead of Q4 earnings ?
Stock Market Today: UltraTech, ACC, Ambuja, JK Cement share prices have gained up to 64% in one-year on strong demand. The Cement prices however declined in Q4 impacting profitability sequentially. The price hikes have been taken by manufacturers in April. Should you Buy, Sell or Hold the stocks?
Ultratech Cement , ACC , Ambuja Cements , JK Cement share prices have risen 27%-64% in a year. The strong Cement demand in the country leading to strong volume growth for Cement manufacturers has helped the earnings growth momentum for cement manufacturers, as operating efficiencies also helped.
During the recently concluded January-December quarter, while manufacturers are likely to be strong volume growth, it is the pricing where the concerns remain, even though operating performance will be supported by declining raw material costs.
Strong volume growth expectations
Analysts at Motilal Oswal Financial Services estimate their coverage universe as Ultratech Cement , ACC , Ambuja Cements , JK Cement and others to report strong volume growth of 10% YoY (three-year CAGR at 8%) in 4QFY24. The average capacity utilization is also expected to remain strong 93% .
Analysts at Nuvama Institutional Equities also said that they expect a strong 8% year-on-year demand growth for companies in their coverage universe (as Ultratech Cement , ACC , Ambuja Cements , JK Cement and others) during the Q4. While ACC is likely to report healthy double-digit volume growth of around 15% as per Nuvama estimates, JK Cement and Ambuja Cement are expected to report low double-digit volume growth as per their estimates.
Also Read- Stock to buy before Q4 results 2024: TCS share price on cusp of breakout. Should you buy?
For others as Birla Corporation , Dalmia Bharat and UltraTech Cement, Dalmia Bharat, Motilal Oswal analysts expect 11-12% growth while Shree Cement , The Ramco Cement and JK Lakshmi cement may clock in 7-8% yoy volume growth.
Average Cement prices decline in Q4
However, it is the cement price correction that remained a dampener as the all-India average per 50 kg cement price was down 7% (down ₹25 per 50-kg bag) sequentially. This has led analysts at Motilal Oswal Financial Services estimate blended realization for their coverage universe to decline 3% year on year and 4% sequentially during Q4.
The decline in operating costs though remains positive and will support earnings nevertheless the earnings of cement manufacturers as Ultratech Cement , ACC , Ambuja Cements , JK Cement and others on sequential basis may decline. Nuvama Institutional Equities analysts expect 5% sequential dip in Ebitda for their coverage universe though is expected to improve 19% YoY in Q4FY24.
Mangesh Bhadang Research Analyst at Centrum Broking too said that he expects Ebitda per tonne for cement manufacturers under his coverage to dip by around ₹150 a tonne sequentially to below ₹1000 a tonne during Q4.
Also Read- Stocks to Buy: Titan , ITC, L&T, Zomato are among 10 large cap picks by Motilal Oswal Financial Services.
Sustenance of Price hikes holds a key
Price hikes have been announced across regions by cement manufacturers as Ultratech Cement , ACC , Ambuja Cements , JK Cement and others. The trend of moderation in Cement prices seen over last five months has tried to be reversed. Though the step is favorable analysts feel that looking at the election season ahead the same may lead to softer demand and hence are watchful on sustenance of price hikes. The government led project announcements while will slow down during election season, analysts say that labour availability also sometimes sees an impact.
Analysts maintain cautious outlook
While the recent decline in power and fuel prices are positive, earnings estimates for FY25E–26 are under risk considering the volatile pricing environment, said analysts at Nuvama Institutional Equities, who stay neutral on the sector.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
Catch all the Business News , Market News , Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
- Top Gainers
- Top Losers
- 52 Week High