Broking firm Share khan has listed the stocks of cement companies Shree Cement, Ultratech Cement, Grasim Industries, The Ramco Cement, and Dalmia Bharat as its top picks from the cement sector. The broking firm recently released its Q1FY2022 Results Review report, in which it named the aforementioned cement stocks as its top recommendations.
Outlook positive on the cement space; Sharekhan
For Q1FY2022, the cement industry's revenue remained basically flat, as slightly lower-than-expected volumes were offset by higher-than-expected realizations. In addition, the cement sector's profitability outperforms expectations, with weighted average EBITDA/tonne up 6.2 percent year over year to Rs. 1,413 against our target of Rs. 1,351/tonne, says the brokerage.
"The cement sector is expected to feel the impact on operational profitability in Q2FY2022 where volumes remain weak, cement prices tread lower q-o-q, while input costs remain firm. However, the sector is expected to see cement prices to rise from September, while demand picks up post the monsoon season containing overall input costs and improving profitability, " the brokerage has said.
Valuation of cement sector
"We stay Positive on the cement space, as we see favourable demand and pricing environment from Q3FY2022. We prefer UltraTech, Dalmia Bharat, Shree Cement, Grasim Industries, and The Ramco Cements," the brokerage has said.
Overall, the cement coverage universe saw a 5% and 15% increase in operating profit (up 51% year over year, down 9% q-o-q) and net profit, respectively. Except for The Ramco Cements and Dalmia Bharat, all cement businesses posted higher-than-expected net results, says the brokerage.
According to Sharekhan, better realization and lower opex drove the cement sector's net earnings outperformance in Q1FY2022. From Q3FY2022, it expects demand and realizations to improve.
Top stocks buys of Sharekhan from the cement sector
Leaders in Q1FY2022 - UltraTech, Shree Cement, JK Lakshmi Cement, India Cements, Mangalam Cement.
Laggards in Q1FY2022 - The Ramco Cements, Dalmia Bharat
Preferred Picks - UltraTech, Shree Cements, The Ramco Cements, JK Lakshmi Cement.
|Companies||CMP (Rs)||Recommendation||Target Price|
|Shree Cement||26581||BUY||Rs 31610|
|Ultratech Cement||7307||BUY||Rs 8800|
|Grasim Industries||1440||BUY||Rs 1780|
|The RamcoCement||969||BUY||Rs 1310|
|Dalmia Bharat||2042||Buy||Rs 2410|
The above stocks are based on the report of Sharekhan. Investing in stocks is risky and investors should do their own research. The author, the brokerage firms or Greynium Information Technologies are not responsible for any losses incurred due to a decision based on the above article. Investors should hence exercise due caution as are at record peaks. Please consult a professional advisor.