Building material cos set to report strong growth; check which stocks to buy, hold, sell

Building material cos set to report strong growth; check which stocks to buy, hold, sell

Building material companies with strong traction in real estate, agriculture, and infrastructure, are expected to witness a healthy volume growth in the coming months, Prabhudas Lilladher said in a research note. The brokerage report has identified Prince Pipes stock as their top pick considering a favorable and healthy volume. “Considering healthy volume growth of ~14% post-Q1FY24 (next 9MFY24), as April & First week of May were impacted post migration to global ERP system. We estimate FY23-25E Sales/EBITDA/PAT CAGR of 12.5%/41.3%/60.6% with volume CAGR of 12.3% and EBITDA margin of 13.5%/14.6% in FY24/FY25E,” said the report regarding Prince Pipes.Correction in raw material prices and power & fuel expenses to restore margins

The buoyancy in the real estate market (despite interest rate hike), Government focus on housing, sanitation, and infrastructure,  improvement in the agriculture segment, pick up in export, and increase in branded/large players’ market share, are some of the factors that are expected to positively influence the sales growth of the industry. In addition to that, the correction in the raw material prices and power and fuel expenses are also expected to bring the margins back to the normal level (+250bps YoY) along with EBITDA/PAT growth of 20.8%/21.1% YoY (on a high base), the report added.

Prince Pipes: Downgrade to ‘Accumulate’; Target Price: Rs 718

Supreme Industries: Downgrade to ‘Accumulate’; Target Price: Rs 3, 245

Astral: Downgrade to ‘Hold’; Target Price: Rs 1955

Kajaria: Downgrade to ‘Hold’: Target Price: Rs 1,264

CERA: Downgrade to ‘Hold’; Target Price: Rs 7,805