Cement stocks are like tiny stakes in companies that make the building blocks of our world. Since construction is always ongoing, these companies can be steady earners. If they keep cities growing, your investment might grow alongside them!
Stability
Infrastructure Demand
Dividend Potential
Long-Term Growth
Cement stocks represent shares in companies involved in the manufacturing and distribution of cement. These companies are integral to the construction industry, supplying the primary material for building infrastructure, residential, and commercial projects. Investing in cement stocks allows individuals to capitalize on the demand for construction materials, often exhibiting stability and growth prospects within investment portfolios.
Step 1
Download the INDmoney app and create your free investment account by completing your KYC ( Know Your Customer).
Step 2
Once your Free investment account is ready, you can either search for a Cement Stocks or go to the Stocks section and tap on Trading collection.
Step 3
Choose a Cement Stocks by looking at aspects like past returns, volatility, downside returns & proceed to buy.
The whole cement industry is extremely capital-intensive therefore you need to make sure that the cement company has enough cash flow and financial backing to implement its future development and growth plans. For example, Rs. 3 billion capital expenditure is required for any project of a green field of 1 MT (Million tonne). The ideal standard for any financially well-off cement company is at least 2MT.
In the cement sector there is a high level of fixed cost (the annual maintenance cost is close to 5 US dollars on every tonne), which makes the volume growth of the company very critical. It is equally important to check the factors such as the availability of the raw materials (mainly coal and limestone) for the company.
Not to mention, investors should also research the consumer market. The changes in the price of raw materials or disassociation with the suppliers or contracts can slow down the overall manufacturing process.
As an investor you need to look at the Indian cement market and industry based on different regions (East, West, North, South). In some areas, the demand may become stable or unstable.
More importantly, 60 percent of the consumer market is acquired by the top six company players whereas the rest of the 40 percent is administered by the 40 small companies. Due to the challenging scenario, investors with a low risk-taking appetite can opt for the cement stocks.
For cement companies the cost factor is very important as the higher savings in the production cost the higher profit margin the companies will receive. As the competition is also very high in the industry as an investor you will have to look for companies that can manage their fixed cost, power, and freight over the Indian cement industry in order to excel among its competitors.
As a potential shareholder of a cement company, you need to make sure that the company has not concentrated its production plants in a single region. The cement plants should be topographically spread to battle adverse market conditions. For instance, if one region is not performing well then, the other regions can make up for the loss.
Some of the important ratios you need to look after while you are searching for the best cement stocks to buy in India are ROE, EBITDA per tonne, Top and Bottomline growth, Total debt, etc. Moreover, you also need to evaluate the capacity utilization levels as they are of utmost importance in order to inspect the efficiency of the company in utilizing its capacities.
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