Why were cement stocks buzzing in trade today?

In central India, producers have announced a price increase of around Rs 10 per bag and western India too witnessed price increase of Rs 15 per bag. So there are price increases across the board.

Jefferies noted that demand remains impressive as the sector is benefiting from low rains. According to the brokerage, most dealers have indicated stable or positive offtake for August 2023.

Jefferies continue to expect double-digit demand growth for fiscal 2023-24. The brokerage also pointed out that the second quarter could have a pleasant surprise with operating leverage being played out as offtake is seen as being rather good.

Energy costs will be dipping. Prices on a quarter-to-quarter basis will be flattish.

Meanwhile, foreign brokerage firm Nomura remains bullish on Shree Cement and has upgraded the stock to 'buy' from 'reduce.’ The brokerage has a target price of Rs 28,700, implying a 12 percent upside from the day’s close. The counter ended at Rs 25,619 on the NSE.

The key driver for Nomura's upgrade is an adjustment to its one-year forward EV/EBITDA multiple, which has been raised to 19 times from 13 times.

Nomura's decision to boost the multiple is underpinned by several factors, which the brokerage firm views as structural and potentially instrumental in driving future earnings growth beyond the forecast period.

It said Shree Cement will maintain its cost leadership within the industry. This is expected to be achieved through various strategic initiatives, including an increase in the share of green power to 63 percent, an expansion of alternative fuel capacity to enhance the thermal rate of substitution, and the establishment of railway sidings at all plants to reduce freight costs.