6 Cement Stocks To Buy Post Their Quarterly Numbers

It's been a volatile session for the markets last week. As we usher in a new week, investors can look to more volatility considering the geo political tensions. Here are 6 stocks that you can buy from the cement space, post their quarterly numbers.

Cement: High costs impacted profitability

According to Sharekhan, high-cost structure affected net profitability for the companies from the sector.
"For Q3FY2022, the cement sector (ex-Grasim) reported 4.7% y-o-y growth (up 8.6% q-o-q) in net revenue, led by 9.1% y-o-y rise (almost flat q-o-q) in realisations, while volumes declined by 3.5% y-o-y (up 8.8% q-o-q). Further, the cement sector's profitability in terms of weighted average EBITDA/tonne declined by 25% y-o-y and q-o-q to Rs. 895 (versus our expectation of Rs. 1,038/tonne). Steep rise in coal/pet coke prices led to high power and fuel costs per tonne (up 43% y-o-y and 23% q-o-q), which affected operational profitability.

Overall, the cement coverage universe reported 28% y-o-y/34% y-o-y dip in operating profit/net profit. The building material sector reported 21% y-o-y growth in revenue, while OPM declined by 432 bps y-o-y, leading to 9% y-o-y dip in net profit. Century Plyboards, APL Apollo Tubes, and Kajaria Ceramics reported better-than-expected performance, led by beat on net revenue. Greenpanel Industries reported strong beat on operating profits margin," the brokerage has said.

Stocks to buy from the cement space

In the cement space, Sharekhan has a buy call on Shree Cements for a price target of Rs 30,800, while on Ultratech Cement, the brokerage has set a price target of Rs 9,200.

For Grasim, the brokerage has a buy call with a price target of Rs 2100 and for  Ramco, Sharekhan has set a price target of Rs 1080.

Other stocks that the brokerage has a buy call from the cement space, include names JK Lakshmi Cement and Dalmia Bharat.

Valuation and view on cement stocks

Sharekhan says that it expects cement and building materials sectors to benefit from continued focus of government to increase infrastructure investments and structural growth drivers in the residential sector.

"However, for cement and building material players, rise in oil prices led by Russia Ukraine face off pose a challenge in terms of likely rise in power and fuel costs. For infrastructure, improvement in tendering activity would be keenly looked after apart from competitive intensity in the EPC segment. The logistics space is expected to benefit from pickup in economic activities along with key structural triggers playing out like GST, national logistics policy, and PLI schemes, among others. The real estate sector is expected to benefit from structural growth drivers in the residential segment, which is likely to sustain pre-sales momentum going ahead," the brokerage has said.