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Pre poll infrastructure work to give a boost to cement sales

Infra News - Published on Mon, 14 Jan 2019

Image Source: The Economic Times
Economic Time reported that a pick up in infrastructure and construction jobs has resulted in cement sales volumes growing in strong double digits over the past few quarters and the momentum is likely to continue ahead of the Lok Sabha elections. Typically, cement growth spikes in elections years, and experts believe that 2019 will be a strong year for construction as the elections are likely to be held in May 2019 and states, such as Andhra Pradesh and Maharashtra, too might hold elections. Despite a potential slowdown in tendering and ordering activities, project execution is seen increasing boosting cement sales.

Brokerage CLSA said in a report on the cement sector that “The FY19 saw a trend reversal as demand is expected to grow at 9 per cent- 10 per cent, the fastest in almost a decade. Industry feedback indicates FY19 growth has primarily come from government-led infrastructure and a boost from pre-election spending (states as well as the centre). Across regions, the South and East have witnessed strong growth, while the west faces challenges. Momentum should continue and we build-in 7 per cent growth for FY20, despite a tough base.”

Besides infrastructure growth, cement sales also got boosted by the pick-up in low-cost and affordable housing programmes.

Brokerage Motilal Oswal said in a report that “Issues related to sand mining in the states of Rajasthan, Bihar, Maharashtra and Tamil Nadu are also now behind, further fortifying the demand trend.”

According to ET’s research arm, ET Intelligence, cement shares have grown 1 per cent in the past one month, as against a 0.5 per cent growth in benchmark index Sensex. During this period, J K Lakshmi Cement was the top gainer, with share prices increasing over 18 per cent. Shares of Prism Johnson, Ramco Cements, and India Cements rose 8-10 per cent.

Brokerage Anand Rathi said that “Profitability is expected to get better due to shrinking petcoke and diesel prices, but the impact would be small as the price drop began only at the quarter’s end. Cement prices have largely been steady. We expect revenue to grow 13 per cent and EBITDA 5 per cent, though profit after tax would contract 27 per cent year-on-year. We prefer some of the central and southern companies, such as Heidelberg, Birla Corp, Dalmia and Sagar.”

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Posted By : Joykumar Irom on Mon, 14 Jan 2019
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