Brokerages see robust outlook for cement sector - ACC, Ultratech, India Cements are 3 stocks for big gains

The outlook for cement sector remains strong with at least two reports expressing optimism on demand situation, pricing and production. An ICRA report estimates production to go up 12 per cent to 330 mln tn in FY22.

The same report estimated production to go up by 8 per cent to 360 mln tn in FY23.

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The production has gone up by 44 per cent to 140 mln tn in five months between April and August.

The cement utilisation is expected to go up 62-64 per cent during this period, the report estimated.

The prices have seen an uptick on the back rising raw material cost especially pet coke which is an essential ingredient in the manufacturing of cement.

The prices have been firming up and cost has increased between Rs 10 and 50 for each bag of cement.

The demand has gone up due to activity with respect to national infrastructure pipeline. The demand has gone up in rural areas and from infrastructure and road construction activity.

The demand has also led to increase in the prices of cement.

In FY22, it is expected that the capacity addition will go up 18-20 mln tn. In FY 23, another 27-30 mln tn capacity is likely to be added.

PhillipCapital has also taken a positive view on the sector. The demand has been robust from all quarters barring the eastern parts of India, it said.

The prices are expected to go up by Rs 15-20 per bag in Q3FY22, the report further said.

The demand is expected to come from real estate and infrastructure sector.

The sector is likely to gain from strong demand, pricing, increased realisations and strong supply chain.

Stocks in Focus – The reports put ACC Limited, Ultratech Cement Limited and The India Cements Limited are under the radar of the two brokerages.

Even the mid cap companies in this space are also expected to remain in focus.

Shares of ACC ended at Rs 2314, up 2.4 per cent from the Wednesday closing price. Equity markets were shut on Friday on account of Dussehra.

Shares of ACC ended at Rs 7428, up almost 1 per cent from the Wednesday closing price. Equity markets were shut on Friday on account of Dussehra.

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Shares of India Cement ended at Rs 214.80, up 8 per cent from the Wednesday closing price. Equity markets were shut on Friday on account of Dussehra.

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