Stock Market today: UltraTech Cement, Ambuja Cements, ACC, Shree Cement, among other cement stocks, gained up to 3% during the intraday trade on Thursday following the goods and services tax (GST) reforms.
The GST Council last evening announced a cut in GST taxes for cement. While analysts believe this is a positive for the cement sector, they are still watchful of demand recovery and price improvement, which remains soft in the seasonally weak September quarter.
Unsurprisingly, most cement stocks gave up a majority of their gains and were trading marginally higher in the early afternoon session.
GST Reforms On Cement
On Wednesday, the GST Council, led by Finance Minister Nirmala Sitharaman, reduced the GST tax rate on cement from 28% to 18%. This rationalisation of cement taxation is positive over the longer term and comes at a time when the sector is rapidly expanding capacity to meet anticipated demand growth.
However, in the near term, analysts are watchful of price hikes and demand pick-up after the monsoon-impacted September quarter comes to an end.
GST Cement Reform — Analysts’ View
Emkay Global Financial Services said that it sees a negligible impact from the likely cut in GST rate to 18% (from 28%), owing to relatively inelastic cement demand.
Consumption could slow down briefly, owing to higher channel inventory, although it will normalise in the ensuing months on pent-up demand and a busy construction period in H2, the brokerage opined.
Cement prices, which had remained relatively stable during the previous three months despite the monsoon, experienced a significant drop in August, notably in the eastern region, as per PL Capital channel checks.
While companies were aiming to boost prices ahead of GST rationalisation, dampened demand and the upcoming festive season are likely to be unfavourable.
PL Capital anticipates that increased pet coke and gypsum costs will put pressure on the Q2FY26 profitability of cement manufacturers.
“While demand is expected to improve post-monsoon, new capacities are adding to the challenge on pricing sustainability,” PL Capital added, saying it is better to wait for a more suitable entry point into cement stocks.
Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
