5 cement stocks that may rally 12% in 2 months; check stop loss, weightage, other details

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October 20, 2020 2:45 PM

The brokerage firm noted that India’s cement industry has shown resilience amid the phase-wise opening up of the economy in a seasonally weak quarter.

cement stocks, ACC, Ambuja CementsMotilal Oswal Financial Services is positive on the ACC stock and sees up to 12 per cent potential upside in the stock price

Cement companies stocks are in focus today, as ACC reported a 20.25 per cent increase in consolidated net profit to Rs 363.85 crore for the third quarter ended September 30. The company follows the January-December financial year and had posted a profit of Rs 302.56 crore in the same quarter a year ago. The stock has hit a fresh 52-week high of Rs 1,622 apiece, rising 3.8 per cent from the previous close. ACC Managing Director & CEO Sridhar Balakrishnan said that the volumes and sales have bounced back to prior-year levels. Company’s efficiency and cost reduction plans have helped drive significant margin expansion during the quarter. Motilal Oswal Financial Services is positive on the ACC stock and sees up to 12 per cent potential upside in the stock price.

Research and brokerage firm Motilal Oswal Financial Services has prepared a basket of 5 high conviction cement stocks, out of which three stocks have hit a fresh 52-week high in today’s range-bound session. The brokerage firm noted that India’s cement industry has shown resilience amid the phase-wise opening up of the economy in a seasonally weak quarter. Motilal expects the basket 5 stocks to do well in the short to medium term. “One can buy this basket of 5 stocks with a potential upside of 10-12% over the next 1-2 months. The stop loss for the entire basket should be 6%,” it said.

UltraTech Cement: The weightage of UltraTech Cement in the basket is 25 per cent. The brokerage firm expects UltraTech’s margins to improve, driven by the turnaround at its acquisition and setting up of new waste heat recovery system (WHRS) capacities to reduce power consumption.

Ambuja Cements: Ambuja Cements too holds the same weightage of 25 per cent in the high conviction stock basket. The stock hit a new 52-week high today. The cement major is setting up a 3.1mt clinker line and 1.8mt cement grinding unit at its greenfield plant Marwar-Mundwa in Rajasthan. Under the leadership of new MD and CEO, Neeraj Akhoury, Motilal expects the company to deliver on cost as well as market share.

ACC: Motilal Oswal is positive on ACC as it believes that the company has arrested its market share losses since CY17 and with planned capacity expansions in CY22, the proportion of inefficient assets would decline, improving profitability. It has a 20 per cent weightage in the basket.

JK Cement: JK Cement stock price climbed up to make a fresh 52-week high today. The brokerage firm has given 20 per cent weightage to stock in the basket. According to Motilal Oswal, JK Cement is best placed in the industry to benefit from the robust north India market as it is the only company with new integrated capacity in the region. Volume growth is also expected to be much higher for JK Cement v/s peers, given its recent expansion.

Dalmia Bharat: This stock has got 10 per cent weightage in the high conviction stock basket. The brokerage firm believes that Dalmia Bharat, with capacity expansion in eastern India, is well-placed to gain market share in the region. “We are positive as the commissioning of new capacities and ongoing deleveraging should drive upside,” it said.

(The stock recommendations in this story are by the respective research and brokerage firm. Financial Express Online does not bear any responsibility for their investment advice. Please consult your investment advisor before investing.)

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