No heroes for cement sector in 2018, only zeroes! Here are some

Companies have also increased their capacity and addition to excess capacity of the production units have also declined the overall profit margins

No heroes for cement sector in 2018, only zeroes! Here are some

The Indian cement sector had a bearish season in the year 2018. The companies faced headwinds in terms of increase in production cost, which affected the overall profit growth. Increase in petrol and diesel prices in the first two quarters of the year also proved to be quite negative.

Companies in the sector are also suffering due to excess capacity built in and the result has been plain to see in terms of declining overall profit margins. The volume numbers are still facing a qualified slowdown in volumes and things are not expected to get better - rise in prices of products is still under cloud. The sector witnessed a downfall of 10 to 50 per cent in this year.

Derivative & Technical Analyst, Chandan Taparia, Motilal Oswal spoke to Zee Business Online, "The cement sector of India experienced a correction in 2018 and it will likely remain volatile in initial phases of 2019."

The volume growth expected in financial years 2018 to 2021 is likely to be 6 to 7 per cent, which was just 3 per cent during the financial years 2015 to 2018.

No heroes for cement sector in 2018, only zeroes! Here are some

1. India Cement - the worst performing company with negative 49.2 per cent returns.

2. JK Lakshmi - gave negative 35.7 per cent returns in the year 2018.

3. JK Cement - one of the more popular brands in the segment fell over 35.3 per cent.

4. Ambuja Cement- Ambuja Cement gave 19.6 per cent loss to its shareholders

5. ACC - one of the largest player in the segment, gave 16 per cent loss to its shareholders.

5. Ultratech - gave over 7.5 per cent negative returns in 2018.

6. Shree Cement - delivered a loss of 5.8 per cent to its shareholders.

7. Heidelberg - was the stock with mere 0.9 negative margins in 2018.

Cement pricing trend in the year 2018

Q1CY18: 1st quarter of the year 2018, had a fall of approximately, 1 per cent.

Q2CY18: 2nd Quarter of the current year 2018, faced a rise of 7 per cent in cement prices.

Q3CY18: 3rd quarter had a fall of 3 per cent straight in cement prices. 

Q4CY18: 4th quarter of the year 2018, had a fall of approximately, 7 per cent.

Cement sector revenue share ratio:

- 18 per cent of revenue is generated through infrastructural projects.

- Housing projects contribute the most with 66 per cent to the cement sector.

- Commercial projects contribute 16 per cent revenue to the cement sector.

"The cement industry has players who are majorly driven on infrastructure and housing, demand is currently low, hence 2019 will be watchful," Taparia added.

Cement prices in comparison to last year (Price per 50kg)

-Eastern regions of India- Rs 310 in November 2018 as compared to Rs 314 in November 2017.

-Western regions of India: Rs 299 in November 2018 as compared to Rs 297 in November 2017.

-Northern regions of India: Rs 308 in November 2018 as compared to Rs 302 in November 2017.

-Central regions of India: Rs 326 in November 2018 as compared to Rs 304 in November 2017.

-Southern regions of India: Rs 314 in November 2018 as compared to Rs 336 in November 2017.

-The whole of India: Rs 312 in November 2018 as compared to Rs 311 in November 2017.

Cement sector outlook in 2019:

1. The cement sector of India has an attractive valuation

2. GST rate of 28 per cent is likely to get reduced on cement in 2019.

3. Industrial prices are likely to get reduced due to fall in housing demands, pan India.

4. Infrastructural projects to get an additional demand due to elections.

"The industry has potential. Recovery after GST rate cut, is expected. Overall limited gains expected in the year 2019," revealed Taparia.

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Cement sector outlook in 2019:

1. The cement sector of India has an attractive valuations

2. GST rate of 28 per cent is likely to get reduced on cement in 2019.

3. Industrial prices is likely to get reduced due to fall in housing demands, pan India.

4. Infrastructural projects to get an additional demand due to elections.

"The industry has potential, recovery after GST's rate cut expected, overall limited gains expected in the year 2019." said Taparia.

Written By: Sumit Mehrotra
Updated: Mon, Dec 31, 2018
04:35 PM IST
New Delhi, ZeeBiz WebDesk
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