ICICI Securities is bullish on the cement sector on account of likely improvement in utilisation, realisation and margins in the next few years. The brokerage house believes any correction in cement stocks could be an opportunity to buy cement stocks. ICICI Securities is bullish on UltraTech Cement, Shree Cement, Ramco Cements Ltd, Ambuja Cement and JK Lakshmi Cement.
Cement companies under the coverage of ICICI Securities reported 32 per cent year-on-year rise in EBITDA per tonne growth during the first quarter ended June 30, 2016 to Rs 977 per tonne which stood highest in the past fifteen quarters on account of lower cost. However, realisations declined 2.7 per cent year-on-year to Rs 120 per tonne, cost per tonne slid by 9.5 per cent year-on-year or by Rs 360 per tonne leading to an uptick of Rs 240 per tonne in EBITDA per tonne. Power and fuel cost per tonne dropped by 13 per cent year-on-year on account of a sharp fall in petcoke price, which dipped by 40 per cent on year-on-year basis.
Volume of cement companies under the coverage of ICICI Securities jumped by 9 per cent year-on-year against estimates of 8 per cent year-on-year growth. The brokerage house has upgraded FY17E and FY18E EBITDA by 2-4 per cent during Q1FY17 results review.
Since the beginning of the ongoing financial year, cement stocks have given an average return of 30 per cent against nearly 11 per cent jump registered by benchmark BSE Sensex. Kakatiya Cement Sugar shares surged 68.74 per cent to Rs 352.50 on April 1, 2016 from Rs 208.90 on April 1. Deccan Cement, OCL India, The India Cements and Mangalam Cement soared by 60.38 per cent, 59 per cent, 58.45 per cent and 57.50 per cent during the same period. On the other hand, Panyam Cements, Keshav Cement and Andhra Cement dipped 24 per cent, 4.58 per cent and 1.37 per cent, respectively.