6 Quality Stocks From Cement Sector Likely To Surge, Motilal Oswal Assigns Buy For High Returns

Motilal Oswal in its December 2022 Result Preview Report on Cement last listed six high-quality stocks with a "BUY". These six stocks are Birla Corporation, Dalmia Bharat, Grasim Industries, JK Cement, JK Lakshmi Cement, and UltraTech Cement. These stocks are likely to surge and can give high returns of up to 23% from their current level. Here are the stocks' key takeaways listed by the brokerage in the report:

1. Birla Corporation Ltd.

Motilal Oswal assigns a buy on the stock with a target price of Rs 1200. It claims 23% upside from its current level. It is a midcap stock with a market capitalisation of Rs 7,515.72 crore.

The stock is currently trading at Rs 978/share on NSE. Its 52 week high is Rs 1,628.50/share and 52 week low is Rs 823/share, respectively. It surged 2.68% in a week. n the last 1 year it has fallen 35.96% and moved up 38.88% in the last 3 years. It fell 19.16% in the last 5 years.

Motilal Oswal said, "We estimate volume growth of 18% YoY, partly aided by newly added capacity at Yawatmal, Maharashtra. We expect OPEX/t to rise by 11% YoY on a 16%/8%/9% rise in variable/freight cost/other expenses. Realization is expected to increase 6% YoY and 2% QoQ. Weak OPM at 8.2% and higher depreciation/Interest cost are expected to result in a loss of INR200m v/s profit of INR661m YoY. We expect EBITDA/t at INR452 (down 32% YoY /up 75% QoQ)."

2. Dalmia Bharat Ltd.

Motilal Oswal has assigned a buy on the stock with a target price of Rs 2080/share. It claims a potential upside of up 10% from its current level. It is a midcap stock with a market capitalisation of Rs 35,722.16 crore.

On NSE, the stock is trading at Rs 1,896/share, down 0.16%. Its 52 week high is Rs 2,104.15/share and its 52 week low is Rs 1,212.50/share, respectively. It grew 1.01% in 1 week. However, in 1 year it fell 5.42%. It gave a massive 121.32% in the last 3 years. Since its listing, it has given 67.98% positive returns. It was listed on 22 January 2019 on the exchange.

The brokerage said, "We expect sales volume to grow 11% YoY and estimate a 11% YoY and 4% QoQ increase in realization with price hike in its key markets (east and south India). We expect OPEX/t to increase by 7% YoY (decline 2% QoQ) on a 14%/2% rise in variable/freight costs. OPM is expected to grow 3pp YoY and 5pp QoQ to 17.8%. We expect EBITDA/t at INR950 v/s INR718/INR653 in 3QFY22/2QFY23."

3. Grasim Industries Ltd.

The brokerage has a buy on the stock with Rs 1970/share target price. It claims 20% potential upside from its current level. It is a large-cap stock with a market capitalisation of Rs 1,0933 crore.

The stock is currently trading at Rs 1,657/share on NSE, up 0.11%. Its 52 week high is Rs 1,929.80/share and 52 week low is Rs 1276.60/share, respectively. It fell 0.98% last week. It gave 10.78% negative return in a year. However, in 3 and 5 years it gave 119.19% and 34.84% positive returns, respectively.

The brokerage said, "We expect revenue for the VSF/Chemical segment to grow 8%/6% on a 1% YoY (each) growth in volume and 7%/5% YoY growth in realization, respectively. We expect an EBITDA/kg of INR11.9 for the VSF segment (including VFY) v/s INR23.6 in 3QFY22 and INR17.8 in 2QFY23. EBITDA for the VSF segment is expected to decline 49% YoY and OPM to contract 6.4pp. OPM for the Chemical segment is expected to decline 2.6pp YoY and 2.5pp QoQ to 20%. Chemical segment EBITDA is expected to decline 6% YoY. In 2Q, the company had higher 'other income', backed by higher dividend income from UTCEM."

4. JK Cement Ltd.

The brokerage placed a buy on the stock with a target price of Rs 3490/share. It claims 21% potential upside from its current level with the given target price. It is a midcap stock with a market capitalisation of Rs 22,461.11 crore.

The stock on NSE trading at Rs 2905/share, up 012%. Its 52 week high is Rs 3,646.45/share and 52 week low is Rs 2003.70/share, respectively. It surged 0.9% last week. However, it fell 16.86% in the last 1 year. It gave 127.46% in 3 years and 154.83% in 5 years, respectively.

The brokerage said, "We expect Gray Cement volume to grow 23% YoY, partly aided by newly added capacities in Central India. However white cement volume is expected to decline 12% YoY. Gray Cement realization is expected to rise marginally 1% YoY due to muted realization growth in its key markets. White cement realization is expected to grow 8% YoY. We expect EBITDA/t at INR886 v/s INR1,116/INR814 in 3QFY22/2QFY23. We expect variable/freight cost to increase 12%/6% YoY and OPEX/t to rise by 3% YoY (decline 3% QoQ)."

5. JK Lakshmi Cement Ltd.

Motilal Oswal has a buy on the stock with a target price of Rs 840/share. Stock purchased at the current market price would lead to up to 11%  gains from its current level. It is a midcap stock with a market capitalisation of Rs 9,005.58 crore.

The stock is trading at Rs 760/share on NSE. Its 52 week high is Rs 896.90/share and 52 wee low is Rs 366.25/share, respectively. It has given2.01% return last week. In gave 28.44% in 1 year, 120.06% in 3 years and 70.33% in 5 years, respectively.

According to the brokerage, Sales volume is expected to grow 2% YoY and 9% QoQ. Realization is expected to increase 3% QoQ. We expect variable/freight cost per tonne to rise by 33%/10% YoY. We expect OPEX/t to increase by 21% YoY. EBITDA/t is estimated at INR639 v/s INR595/INR601 in 3QFY22/2QFY23. 'Other income' is estimated to decline due to lower yields and interest cost is expected to decline due to debt reduction.

6. UltraTech Cement Ltd.

The brokerage assigned a target price of Rs 7770/share with a buy call on the stock. It claims a potential upside of up to 7% from its current level. It is a large-cap stock with a market capitalisation of Rs 2,11,456 crore.

The stock's current market price on NSE is Rs 7314/share. Its 52 week high is Rs 7,946/share and 52 week low is Rs 5,157.05/share, respectively. It zoomed 3.96% in a week. However, it fell 4.53% in the last 1 year. It gave 63.53% in 3 years and 60.91% in 5 years, respectively.

The brokerage said, "We expect sales volumes to rise by 11% YoY and QoQ (each). Variable cost per tonne is expected to increase 15% YoY (flat QoQ). Opex/t is estimated to rise 12% YoY (decline 2% QoQ). RMC revenue is expected to increase by 43% YoY and 8% QoQ. However, white cement revenue is expected to decline 5% YoY due to lower volume (decline 10% YoY). In 3QFY23, UTCEM commissioned 5.5mtpa grinding capacity (part of Phase I expansion) spread over North, West, and Central India. It also commissioned 0.4mtpa Wall care Putty plant at Nathdwara, Rajasthan (North). We expect EBITDA/t at INR945 v/s INR1,046/INR808 in 3QFY22/2QFY23."

Disclaimer

The stocks have been picked from the brokerage report of Motilal Oswal. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to consult with certified experts before making any investment decision.