Sagar Cement stock loses steam a day after hitting new high

Shares of south-focused Sagar Cements Ltd hit a new 52-week high of Rs317 on the National Stock Exchange on Tuesday. However, investors chose to book profits in the stock, with shares of the company tumbling more than 4% in Wednesday’s opening deals.

Analysts say, sentiment for the stock may have turned because of moderating cement prices in the company’s key markets in July. Andhra Pradesh/Telengana account for around 60% of it’s sales followed by Tamil Nadu and Karnataka, which contribute 16% and 9%, respectively, to overall sales.

Dealer channel checks by JM Financial Institutional Securities Ltd showed that average cement prices witnessed a decline of 2% month-on-month in July with the onset of monsoons. The moderation in prices was primarily led by decline in eastern India, which saw a month-on-month decline of 5.5% and south where prices fell 3.4% sequentially. At an all-India level, cement prices fell to Rs368/bag in July from Rs376/bag in June. One cement bag weighs 50 kilograms.

The September quarter is seasonally weak for the cement sector given that the period witnesses monsoon rains. So, cement prices could see a further correction, analysts have cautioned.

In the backdrop of elevated input costs, correction in cement price would mean lower realisations and consequently contraction in operating margins.

In the post June quarter earnings conference call, the management of Sagar Cement had said they expect further cost increase of Rs100/tonne in Q2 in power & fuel due to sharp increase in fuel prices. Overall, costs are expect to rise another Rs150/tonne sequentially, taking fuel, freight and other costs altogether.

NEWS CREDIT: LIVE MINT

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