Last Update: February 08, 2023, 14:23 IST
Finance Minister Nirmala Sitharaman. (Photo: PIB YouTube)
Shares of cement manufacturers were trading up to 3 per cent higher on BSE in Wednesday’s intra-day trade.
In Wednesday’s intra-day trade, shares of cement makers were trading up to 3 per cent higher on the BSE. Share prices of UltraTech Cement, Ambuja Cements, JK Cements, Ramco Cements rose between 1-3 per cent on February 8, a day after Finance Minister Nirmala Sitharaman indicated that the government is open to considering a reduction in the Goods and Services Tax May be (GST) on cement.
UltraTech Cement, Ambuja Cement, India Cements and Heidelberg Cement India rose 3 per cent each. ACC, Dalmia Bharat, Star Cement and JK Cement gained over 2 per cent each on the BSE.
In a session with members of the Confederation of Indian Industry (CII) in New Delhi, she assured that the fitment committee would look into the current 28 per cent GST rate on cement.
Meanwhile, analysts at Emkay Global Financial Services expect industry profitability to increase by Rs 150-200/tonne QoQ in the January-March quarter (Q4FY23), mainly due to input cost savings and higher operating profit. International petcoke prices corrected by >35 per cent to USD 175 per tonne from their highest level (22 Apr-22). The brokerage firm said in a sector update that despite a 35-50 per cent correction in South African/Australian non-coking coal prices over the past few months, petcoke consumption is still 10-15 per cent cheaper than coal.
Cement companies are looking to increase prices by Rs 5-15/bag in February 2023 across sectors. The note added that such hike would be revealed in the next few days.
While margin improvement is expected to be visible from the July-September quarter (Q3FY23), a sustainable correction in energy prices will be critical for further improvement in profitability given the limitations in price increases. Despite near-term challenges, demand outlook is expected to remain strong considering pick-up in the housing cycle and increased government spending for infrastructure projects in the upcoming general elections, ICICI Securities said in a cement sector result. Preview.
According to foreign brokerage firm Jefferies, a cut in GST from 28 per cent to 18 per cent would mean a 7-8 per cent cut in customer pricing. This will provide a modest uptick in volumes and is positive for pricing in the medium term.
Analysts expect higher fuel costs to impact profitability of cement companies in 2022, but expect that to change this year.
Cement demand is expected to improve over the next few quarters on the back of a strong Union Budget as well as the upcoming elections. Kotak Institutional Equities said, “GDP growth of 3.3 per cent in FY24 coupled with 33 per cent growth in capital expenditure is positive for cement demand growth.”
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