Cement major Shree Cements appears to be on a roll as the stock surged 18% in a month’s time!

 

2022 started off badly for the stock of Shree Cements as it lost around 19.7% of its value in the first two months of the year. The Union Budget 2022 brought great for cement stocks as the government announced massive capex plans. The same drove the stock of Shree Cements up 5%. But when tensions were high due to an expected assault, Shree Cements tanked 5.3% in a day. Moreover, the day Russia attacked Ukraine, the scrip fell 5.9% in a day!! 

After falling below the Rs 22,000 level, the stock saw some support from buyers as buying picked up once again. From 8th March, 2022, bulls began buying cement stocks as Shree Cements saw a trend reversal as it grew 19.3% in a span of two months as the uptrend continued until early May.

However, the month of May brought forth one of the worst quarters for cement stocks as the shares of those companies were in freefall. Cement stocks were registering fresh lows, some hitting 52-week lows, on a daily basis in a selloff which lasted until mid-June due to weak demand and higher input costs. All cement companies reported significant decline in profits due to higher fuel costs triggered due to the Russian invasion of Ukraine.

17th June marked a turnaround for the cement industry as FPIs and domestic investors took an interest in cement stocks once again. Shree Cements, which had fallen below the 18,000 level during the selloff, reclaimed the Rs 20,000 mark in a month and the Rs 23,000 mark in the next. Early in September, Shree Cements surged over 10% in two sessions!

However, the next few sessions wiped out the excess gains the stock had witnessed before resuming the uptrend. The stock continued its steady upward move as it grew 17.7% in 2.5 months before its move was interrupted by a sharp decline in value, down almost 9%, on account of consecutive block deals.

 

What’s the future outlook for Shree Cements?

Fundamentally, the Kolkata-based cement manufacturer reported a 44% YoY decline in profits while reporting a 15% YoY growth in revenues for the quarter that ended in December 2022. Expenses saw a massive YoY surge as fuel costs, which accounted for the majority of the expenses during Q3FY23, surged 61.3%!!

However, a report by ratings giant Moody’s has stated that India will be seeing strong demand for cement in 2023 and 2024 as growing housing demand, and expenditure on infrastructure projects will help inflate demand. Moreover, there are also reports that cement companies have recently hiked prices by Rs 5-15 per bag, which resulted in such surge in cement stocks.

 

Technically, the stock is trading above its 5,20,50,100, and 200-day moving averages. The RSI of the stock is at 66.59, meaning that the stock is getting dangerously close to its overbought zone, which could lead to selling pressure in the stocks.

The stock has its immediate resistance (marked in yellow) at Rs 26,139.90 per share while the immediate support for the stock (marked in blue) is at Rs 24,453.40 per share.

Almost all brokerages have taken sell side position as the stock appears to have surged too much during the past 3 weeks. Therefore, the stock could see some near-term correction. However, due to the Union Budget’s aim of higher capex and greater residential projects in the country, cement demand is expected to stay solid with a growth of 6-8% over 2023 and 2024, meaning that the stock has good long-term prospects.