Cement Stocks In Demand

This is a good time to add cement stocks in your portfolio as most of the cement companies are trading in green and showing upward movement in its share prices in the last one month. The rise in prices of cement stocks is backed by an increase in cement price per bag and the anticipation of a rise in its demand. Initial research and dealer check shows that cement price is hiked by Rs 20-35 per bag in most regions except the south (final report is yet to come).

Demand of cement is highly co-related with real estate and infrastructure activities, especially housing development, which creates maximum demand. Housing development activity is accountable for 60% of the total cement demand while infrastructure and commercial development activity create 20% and 18% demand respectively.

It is expected that there will be further increase in prices of cement stocks as it is showing an increasing trend. It will be good to bet on Mid-Cap cement stocks like JK Lakshmi Cement whose financial performance has been good in the last quarter. It has shown 13% growth to 14.29 lakh tones in sale volume on a yearly basis in the last quarter despite sluggish economic scenario. Currently, it is trading 12x times of its EPS(TTM) earning while cement industry average P/E is 15 times. We conclude that the stock price is relatively undervalued and will perform better in the long-term.

In the last one month, UltraTech Cement (which is the market leader of the Indian cement industry) is trading at Rs. 1851 per share and has given a return of 8.9%. ACC has given 11% return and is trading around Rs. 1095. JK Lakshmi Cement has given the highest return among all cement companies. It has given a 14% return in the last one month and is trading around Rs. 77.75 per share. Shree Cements has given 6.37 % return and is trading at Rs. 4601 per share.