High cost, weak demand put pressure on Cement stocks

Cement company stocks continue to rolls under weak demand and high operational cost concerns for the second consecutive day. UltraTech Cement stock was down ₹425 in the last two days to ₹5,582 on Tuesday. The country’s largest cement company has announced ₹12,886 crore investment to enhance its production capacity by 23 mpta to 159 mtpa.

Shree Cement decreased one per cent to ₹19,785, while ACC and Ambuja Cement declined marginally to ₹ 2,132 and ₹363. Dalmia Bharat declined 3 per cent to ₹1,237 and India Cement also closed in red at ₹165. Though cement prices fell ₹5-10 per bag across the country in May due to low demand ahead of the monsoon season, cement companies have announced a price hike of ₹15-20 per 50 kg bag in June to pass on the incremental cost to end consumers.

Though the excise duty cut on petrol and diesel will help cement companies bring down the logistics cost, cement demand is expected to remain softened in the near term due to constraint in availability of sand and high temperature slowing down construction activities, said Dharmesh Shah, Research Analyst, Emkay Research.

Anupama Reddy, Assistant Vice­-President ­Sector Head, ICRA, said the cement demand is expected to grow 8% to about 382 million tonne in this fiscal, supported by strong demand from rural housing and infrastructure sectors. The recent budgetary allocation of over ₹9.2 lakh crore towards agriculture, affordable housing and capital expenditure, primarily in roads and railways, is expected to augur well for cement demand, she added.

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