Strong demand, declining costs to boost cement sector: Axis Capital
Amit Murarka, Executive Director at Axis Capital believes the sector is in a Goldilocks scenario, riding on several positive factors such as high demand, lowered costs, and price hikes.
Amit Murarka, Executive Director at Axis Capital is optimistic about the cement industry. He believes the sector stands strong due to several positive factors: high demand, lowered costs, and price hikes. These combined conditions make the industry's situation just right, reminiscent of a Goldilocks scenario.
“We are very well positioned for the overall sector as a whole. Things have aligned very well for the space. We are in a Goldilocks scenario in that sense, strong demand, a decline in cost as well as price hikes,” he told CNBC-TV18.
He expects the upcoming six to twelve months to be favorable for the industry.
UltraTech Cement is his preferred pick from the sector.
From the small and midcap space, he likes JK Cement.
Analysts pointed out that traditionally the second quarter has been a seasonally challenging period for cement companies, with limited price hikes. However, this time, the scenario is different, with cement prices remaining relatively stable, experiencing only slight declines on a sequential basis.
Murarka noted that the fourth quarter generally is the best quarter for the cement sector. Strong demand plus price hikes generally happen in quarter four.
Analysts estimate a 10-12% year-on-year increase in cement demand due to increased infrastructure investments leading up to the elections.
Murarka pointed out that election or pre-election years are a great period for the cement sector as infra spends are high, and private demand gets supported by industry hikes.
“We have seen that coming through this year as well. The state election calendar has been announced for November and general elections should be four to five months after that. Next year is something that we will have to see. We would not expect a double-digit demand growth next year per se,” he explained.
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However, he expects the demand momentum to stay strong.
“Private demand including the urban real estate is looking good from a longer-term perspective,” he stated.
For more details, watch the accompanying video
(Edited by : Shweta Mungre)
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