3 Cement Stocks That Can Give Returns of 20-25% According To Motilal Oswal

Buy the stock of Birla Corporation

The India Strategy report of Motilal Oswal Financial Services reveals the possibility of a near 25% on the stock of Birla Corporation. According to the brokerage the company’s consolidated cement volumes are set to increase by 4% YoY to 3.39 metric tonnes. “Expect blended EBITDA/t at Rs 860 (- Rs 166/t QoQ),” the brokerage,” the brokerage has said.

“The second COVID wave in India dampened the demand momentum in 1QFY22. With gradual easing of restrictions across states in Jun’21, demand witnessed an uptick in Jul-Aug’21. Our channel checks indicate that higher rainfall impacted demand in Sep’21, with a volume decline of 10% MoM. We expect sales volumes for our coverage universe to increase by 5% YoY,” the brokerage has said.

Buy the stock of Dalmia Bharat

Motilal Oswal Financial Services sees an upside of nearly 20% on the stock of Dalmia Bharat. The brokerage expects realizations for the company to remain flat, while it estimates volumes at 4.87mt (+1.5% YoY).

“While we are structurally positive on the industry outlook, we prefer North and Central India as these markets have a higher clinker utilization of over 80%. We adopt 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 valuation comfort,” the brokerage has said.

Buy JK Lakshmi Cement

Motilal Oswal Financial Services also has a buy call on the stock of JK Lakshmi Cement with a price target of Rs 800, which implies gains of 23% from the current levels. The firm expects cement volumes to increase by 3.2% YoY and expects blended realization to decrease by 2.2% QoQ.

“Imported coal and pet coke prices have increased by 2 times in the last one year, which will impact margins of Cement companies going forward. Cost impact has not been felt till date, due to low-cost fuel inventory. We expect energy cost of our coverage companies to increase by Rs 50-60 per tonne in 2QFY22E, followed by another Rs 125-150 to Rs 50-75 per tonne increase in 3Q/4QFY22E. Increase in coal prices in last few days may put further pressure on costs,” the brokerage has said about the industry in general.

Disclaimer

The above 3 stocks to buy are picked from the India Strategy report of Motilal Oswal Financial Services. Please note investing in stocks is subject to market risks and one needs to be cautious at this point of time as markets have gone-up sharply. Neither the author, nor Greynium Information technologies Pvt Ltd would be responsible for losses incurred based on a decision made from this article.