A company is said to be ‘Fundamentally Strong’ when it has multiple and robust business operations involved and can bank on its liquidity positions for short as well as long-term requirements. Moreover, such type of companies would be able to survive in a scenario of financial crisis in the markets and have a competitive edge over others in the industry.
Herein this article, we will analyze 2 such Fundamentally Strong stocks which are related to the Cement Industry.
Since the whole cement industry faced issues pertaining to input costs and inflationary pressures during the second quarter of FY22-23, the companies faced a decline in the margins but were later able to bounce back to the previous levels.
Ultratech Cement Limited
UltraTech Cement Limited, with one of the largest production capacities in the country, is engaged in the business of producing and selling cement and cement-related products. The company generates the majority of its revenue from operations within the country. Product portfolio of the company includes Portland blast-furnace slag cement, Ordinary Portland cement, etc.
Having a quick look at the Quarterly Numbers Reported, the revenues as well as net profits witnessed a growth in the recent period with revenues going up from Rs 13,893 crores in Q2 to Rs 15,521 crores in Q3 and net profits, during the same timeframe, moved from Rs 760 crores to Rs 1,059 crores.
Keeping the positive flow of operations and cost management, the company was able to report good profitability percentages such as the return on equity (ROE) and return on capital employed (ROCE). The first metric mentioned above took a shift from 12.8 percent in FY20-21 to 15.18 percent in FY21-22 and the latter, though a marginal movement, moved from 14.77 percent to 14.86 percent.
The Net Profit Margins of the company have also shown improvements with 11.89 percent in FY20-21 and increasing to 13.64 percent in FY21-22.
The debt-to-equity ratio of the company has been reducing consistently for the past 4 financial years with the most recent movement being from 0.46 in FY20-21 to 0.2 in FY21-22.
Ambuja Cements Limited
Ambuja Cements Limited manufactures and sells concrete, cement, and cement-related products to the construction and building industries. The company has operations throughout India and uses a network of captive ships, bulk cement terminals, railroads, and ports to transport its products to warehouses and customers directly.
Having a quick look at the quarterly numbers reported, the revenues as well as net profits witnessed a growth in the recent period with revenues going up from Rs 7,143 crores in Q2 to Rs 7,907 crores in Q3 and net profits, during the same timeframe, showed an abnormal movement from Rs 46 crores to Rs 482 crores.
Looking at the past numbers, the company was able to report good profitability percentages such as the return on equity (ROE) and return on capital employed (ROCE). The first metric mentioned above took a shift from 13.21 percent in FY19-20 to 15.34 percent in FY20-21 and the latter moved from 17.55 percent to 21.95 percent.
The net profit margins of the company took some hits and showed a marginal down movement from 11.19 percent in FY19-20 to 11.08 percent in FY20-21. The company has been successful in maintaining its ‘debt-free’ status.
Written by Amit Madnani
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