Most cement makers reported decent volume growth in the September quarter. This was led by factors such as a favourable base, a ramp-up of capacities and market share gains.

Among pan-India cement makers, ACC Ltd and Ambuja Cements Ltd saw 18% and 12% growth in sales volumes, respectively. UltraTech Cement Ltd’s volume growth of 18% was on the back of a merger of Jaiprakash Associates Ltd’s cement capacities. Similarly, among regional firms, south-based India Cements Ltd’s double-digit volume growth, too, was driven by the merger of Trinetra Cement Ltd and Trishul Concrete Products Ltd.

On the other hand, volume growth in some markets like Tamil Nadu and Gujarat were impacted by lower sand availability and floods, respectively.

Realizations were much better than anticipated despite September being a seasonally weak quarter. However, an increase in realizations was not adequate to offset the spike in fuel and power costs due to elevated petroleum coke (petcoke) prices.

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While volumes and realizations may head northwards, cement makers are unlikely to see much relief on the cost front, especially of power and fuel. The fear is that if the ongoing rally in global crude oil prices continues, it would lead to a further hardening of petcoke prices, impacting margins.

Meanwhile, many large and midcap cement stocks continue to trade at expensive valuations. Given the aforementioned concerns, valuations need to correct.