In this article, we will cover,
Cement Stocks in IndiaThe Indian cement industry is the world's second-largest producer after China and is the third-largest consumer. Housing & Real estate consists of 65% share of cement demand followed by Public infrastructure, Industrial Development which is 25% and 10% respectively. Cement industry is currently going through a structural change as COVID-19 forced many companies to manage their costs effectively. Strong pricing levels across regions and low operating costs helped cement companies in not only overcoming the crisis but also getting back to growth in FY21. In terms of management commentaries many top cement companies have reinstated their CAPEX plans, which were put on hold due to the pandemic, and this shows that the confidence among large cement players is coming back and tough times are largely over. Over the medium-term cement companies are facing huge cost-related headwinds as most of the cement companies have reported increase in raw material, power and fuel costs backed by soaring energy and logistic costs will pose a challenge in maintaining elevated realisations and profits. Cooling of the commodity prices can cool down the prices and upscale the demand for cement.
List of Best Cement Stocks to buy now in India
|Sr.No||Company Name||BSE Scrip Code||NSE Scrip code||CMP Dec 2022||Rating||Industry|
|1||Ultra Tech||532538||ULTRACEMCO||₹ 6,021.00||2||Cement|
|2||Shree Cements||500387||SHREECEM||₹ 22,394.60||0.5||Cement|
|5||Ramco Cements||500260||RAMCOCEM||₹ 737.15||1||Cement|
|7||JK Cement||532644||JKCEMENT||₹ 2,296.10||1||Cement|
|8||Birla Corp||500335||BIRLACORPN||₹ 1,150.15||0.5||Cement|
|10||India Cements||530005||INDIACEM||₹ 204.90||0.5||Cement|
|11||Star Cements||540575||STARCEMENT||₹ 91.90||0.5||Cement|
|12||JK Lakshmi Cement||500380||JKLAKSHMI||₹ 455.15||0.5||Cement|
|13||Orient Cement||535754||ORIENTCEM||₹ 138.60||1||Cement|
|14||Sagar Cement||502090||SAGCEM||₹ 209.80||1||Cement|
|15||Shree Digvijay||502180||SHRDIGCEM||₹ 64.75||0.5||Cement|
|17||Mangalam Cement||502157||MANGLMCEM||₹ 342.75||0.5||Cement|
How to identify a good Cement company?
- Cement industry is a highly capital-intensive industry. A green field project for 1 MT requires capital expenditure to the tune of Rs.3 bn (2 MT is an ideal size for a company to have some kind of economies of scale).
- This sector operates with a high level of fixed cost (maintenance cost is around US$ 5 per tonne annually) and therefore volume growth is critical. Access to raw materials (limestone and coal) and consumer markets are equally important in the long term. Therefore, any material change in raw material prices or contracts with suppliers can hamper production to a huge extent.
- The Indian cement industry has to be viewed on a regional basis viz, North/South/West/East. Demand may be favourable/unfavourable in some areas. It is also highly fragmented with top six companies already accounting for 60% of industry capacity, the rest 40% is distributed among 40 small players. So conservative investors should pick top companies atleast since the current scenario is challenging.
- Cost factor plays a huge role in cement companies as more the savings in cost more will be their margins. So, a company which can control its freight, power and other fixed costs can score against its peers as the competition level is also very high amongst players in this sector.
- Since cement is a regional play on account of its high freight costs, the company should not have all its plants concentrated in one region. It should have a geographical spread so that adverse market conditions in one region can be mitigated by high growth in the other region.
- Important ratios to look for are EBITDA per tonne, Net Debt/EBITDA, Top & Bottom line growth, ROE & ROCE etc. Also, capacity utilization levels are equally important to look at while analysing a cement company as it shows how efficiently the company is utilising its capacities.
Cement Stocks in India - Portfolio Companies
Key Risks & Conclusion of Cement StocksWith the increase in the infrastructure spending allocation in the current financial budget, and the rise in the real estate momentum the demand for cement has increased. Rising energy and fuel costs remain to be key risk for the cement companies in the near-term. Furthermore, any delay in capacity expansion plans and fear of another wave of COVID-19 could pose a big risk on the cement companies.
Video on how to analyse and pick Cement Stocks for Investments
Model Portfolio:In order to get an exposure to best Indian cement stocks, you would need a total of Rs.50,259 for the below curated portfolio as of 26th December, 2022.
|Company Name||Weightage||CMP Dec 2022||Quantity||Total|
A detailed table with various parameters for Best Cement Stocks to buy
|Sr.No||Company Name||BSE Scrip Code||NSE Scrip code||CMP - 26th December 22||Rating||Industry||Market Cap||Debt/Equity||PE||ROE%||ROCE%||OPM%||Sales Growth(5Yrs) %||Profit Growth(5Yrs) %||Dividend Yield (%)|
|12||JK Lakshmi Cement||500380||JKLAKSHMI||794||0.5||Cement||9,345.00||0.71||21.5||20.0||18.7||15.5||13.20||64.40||0.63|
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