Going ahead, Sharekhan expects demand growth to continue aided by government spending on infrastructure. However, power and freight costs have not yet shown clear signs of reversal.
The cement space has underperformed the Sensex as most of the stocks traded lower by 5-20% during the quarter ended June 2018. Birla Corporation, India Cement and Mangalam Cement were down over 40%, Sharekhan said in its report.
It believes that opex-related pressure and limited scope of increasing cement prices (due to focus on increasing market share) have affected the stock performances.
However, increase in utilisation levels, pricing discipline and sustained operating efficiencies are key parameters in driving the profitability of key cement stocks, going ahead.
The research house maintains its positive view on the sector and has a buy rating on UltraTech and Grasim along with a positive view on Birla Corporation.
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South-India based players such as India Cement and Ramco Cements witnessed weak realisation and increased opex, respectively, despite strong demand pick-up, while Birla Corporation posted stellar Q1FY19 performance backed by higher volume and realisation.
Barring western and eastern regions, average cement prices rose by 2-4% as compared to Q1FY2019 prices.
Going ahead, Sharekhan expects demand growth to continue aided by government spending on infrastructure. However, power and freight costs have not yet shown clear signs of reversal.