Cement companies have made significant gains in the April-June quarter. These companies have fared well despite the hike in power, fuel and freight charges. According to brokerage and research firm JM Financial, the earnings of cement companies have increased due to the rise in cement prices. It was expected to increase by 4 per cent but it has increased to 7 per cent. Due to this the EBITDA (per tonne) has reached Rs 1359. This is 15 percent more than the previous quarter.
Analysts at JM Financial believe that the cement stock has shown a rally and is now trading at a higher multiple. At present, brokerage firms are positive regarding cement companies. Companies are focusing on profitability and growth as demand for cement seems to be increasing. Let us see how is the performance of which cement company and what is the profit opportunity in them going forward.
Target Price : Rs. 8000
There has been a recovery in the company’s volumes in June. Utilization has also been good. The management of UltraTech Cement is confident that the demand for cement will continue to grow due to the ongoing infrastructure projects in the country and increase in demand in rural areas. The company spent 10 billion rupees on capex in the first quarter. The company is following an aggressive expansion strategy. At present, the stock of this company is trading at Rs 7425. There is an increase of 7.7 percent in this.
Target price: Rs. 3,500
There has been a slight decline in the volume of this company in July-August. Although it has happened because of monsoon. Due to this, the price of its cement has come down by Rs 5 to 6 per bag in the southern areas of the country. However, JK Cement has started expansion of its plants at Panna and Hamirpur in UP with capacity of 4 million tonne and 2 million tonne respectively. At present, this stock is trading at Rs 3,184. But going forward there may be an increase of ten percent from its current prices.
Target price: Rs. 2,400
Dalmia Bharat’s quarterly earnings grew 7.9 per cent. It has reached Rs 5,284 per tonne. There is a possibility of 15 percent CAGR in the company in the next ten years. With this, it can expand itself all over India. Dalmia Bharat can increase its capacity from 10 million tonnes to 13 million tonnes by 2029-30. The company has decided to use 10 per cent of its operating cash flow. This can increase the return of shareholders. Its stock was trading at Rs 1,996 on Wednesday. It is expected to increase by 20 percent from the current level.
Cautious attitude of foreign investors regarding the Indian stock market, but why are domestic investors investing money?
JK Lakshmi Cement
Target price: Rs. 790
JK Cement Management expects volume growth of 10-11 per cent in the financial year 2021-22. In the month of June, there was a good increase in demand in the company’s cement. Although there was a slight reduction in July, the company says that the prices were stable. There was no decline in them. However, except in eastern India and Gujarat, there was pressure on prices in the northern parts of the country. The company believes that after the monsoon the prices of its cement will increase by Rs 25 per bag. As far as capax is concerned, the company wants to expand its cement plant in Udaipur to 2.5 million tonnes per annum. 14 billion will be spent on this. For this, 70 percent of the funds will be raised from debt and 30 percent from shares. Currently, the company’s shares are trading at Rs 699, which can give a return of 13 percent from its current level.
(Article: Kshitij Bhargava)
(The stock recommendations given in the story are those of the respective research analysts and brokerage firms. Financial Express Online takes no responsibility for the same. Investments in capital markets are subject to risks. Please consult your advisor before investing.)