Acquired assets and rising prices may trigger investor interest
When there is renewed interest in the stock of a sector leader, it is an indication of improving fundamentals in that sector. This is exactly the case with India’s largest cement manufacturer by capacity, UltraTech Cement. In the three years through this January, the stock had underperformed the Nifty50 index. In the past one month, however, the trajectory has changed and it gained 12.6 per cent against a 1.2 per cent rise in the Nifty.
This new interest in UltraTech can be attributed to three main factors: improving prices, gains from the assets it acquired in the recent past and cost savings. After a long time, cement manufacturers have not only been able to increase prices, but also sustain it. This is a favourable sign as analysts believe the industry is entering a demand cycle wherein manufacturers would be able see improvement in price realisations at improved utilisation levels.