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Cement stocks gain on Sitharaman’s GST review signal

Vivid News 24: In Wednesday’s intraday trading on the BSE, shares of cement producers were trading up to 3%. The following day, on February 7, after Finance Minister Nirmala Sitharaman suggested that the government would be open to considering a cut in the goods and services tax (GST) on cement, the share prices of Ultratech Cement, Ambuja Cements, JK Cements, and Ramco Cements all increased by 1-3%.

Ambuja Cements, India Cements, HeidelbergCement India, and UltraTech Cement all had 3% gains. On the BSE, ACC, Dalmia Bharat, Star Cement, and JK Cement all saw gains of 2%. During a meeting with the Confederation of Indian Industry (CII) in New Delhi, she gave the assurance that the fitment committee would investigate the current GST rate of 28 percent on cement.

The profitability of the sector is forecast to rise by Rs 150–200/tonne QoQ in the January–March quarter (Q4FY23), driven primarily by lower input costs and improved operational leverage, according to analysts at Emkay Global Financial Services. Petcoke prices have decreased by more than 35% globally from their peak (in April 22) at US$175/ton.

Also Read Ambuja Cements profits up 46%, Q4 earnings better than expectations

Petcoke usage remained 10-15% less expensive than coal on a per Kcal basis than coal consumption despite a recent 35-50% drop in South African/Australian non-coking coal prices, the brokerage firm reported in a sector update. In February 2023, cement makers plan to increase prices by Rs 5–15 per bag regionally. The message continued, “Absorption of such rises will be evident over the next few days.”

Given the restrictions on price increases, a sustained correction in energy prices would be essential for a further improvement in profitability, even though an improvement in margins is anticipated to be noticeable from the July-September quarter (Q3FY23) onward.

Despite short-term difficulties, the demand outlook is anticipated to remain positive going forward, ICICI Securities stated in a preview of the cement sector’s results. This is because the housing cycle is improving and government spending on infrastructure projects is increasing as we approach the next round of general elections.

A reduction in the GST from 28 to 18 percent would result in a 7-8 percent decrease in client prices, according to global brokerage firm Jefferies. It will provide volumes a slight boost and is good for prices in the medium run, it was stated. Analysts predict that this year will be different from 2022, when increasing fuel prices hurt the financial line of cement producers.

A strong Union Budget and forthcoming elections are projected to increase cement demand over the next quarters, they noted. According to Kotak Institutional Equities, the increase in capital spending by 33 percent YoY to 3.3 percent of the GDP in FY2024 is favorable for the growth of the cement demand.

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Vishnu Soni
Vishnu Sonihttps://vividnews24.com/
I am working at NewsMarkets24 Network for the last several years, I learn a lot of things here like News editing, News writing, and how to manage my team to maintain our goals. My job does not only give me experience but also helps to shape my person for success.
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