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The Cement industry has hiked prices again in Apr’21, after the hikes in Mar’21, to pass on the cost inflation. Prices have been raised by Rs 20-30/bag MoM in East India and by Rs 5-10/bag in other regions, led by a strong uptick in urban real estate and infrastructure activity.

Demand remains strong, particularly in East India, where it is growing by over 10%, which should help absorb these hikes. The hikes should also alleviate concerns on near-term margins from the sharp commodity cost inflation- petcoke, coal, and diesel prices are up 109%, 54%, and 34% YoY, respectively -seen in the last few months.

“We are structurally positive on the industry and we prefer players catering to North and Central India as these markets have clinker utilization of over 80%,” opined Motilal Oswal Institutional Equities.

The broking firm adopts a bottom-up stock-picking approach and prefer companies that: a) are moving down the cost curve, b) have the potential to gain market share, and c) provide comfort on valuations.

“We estimate that Cement spreads are currently at the highest level since Jun’20 despite the cost inflation. UTCEM is our top largecap pick. DALBHARA and JKCE are our top midcap picks. We like ACC as a value pick, but do not see much upside in SRCM, TRCL, and ACEM whose potential market share gains are already priced in,” it added.

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