Cement Stocks Outlook for the week – 11 to 14.08.2014
( www.rupeedesk.in )
Stocks of major cements companies will be range bound next week, with companies
based in the South performing better than their peers. South India based companies such
as Ramco Cements and India Cements are likely to do well as newly-formed Telangana is
building a new capital.
Prices of cement usually fall during the monsoon months but this time around they have
remained flat month-on-month. Except in some regions of south and west, there was no
major price change across regions from the previous month. Average prices were 323
rupees per 50-kg bag during July against 322 rupees per bag in June.
Performance of cement manufacturers was largely subdued in Apr-Jun compared to that
in the year-ago period, but on a sequential basis, there was improvement in top line and
bottomline.
Large cap stocks like Ambuja, UltraTech and Shree Cement have now reached their fair
valuations after the sharp rally in the previous three months due to a favourable election
outcome. However, the midcap space still has potential for further upside from current
levels.
In the midcap space, we like the business fundamentals of JK Cement (doubling white
cement capacity), JK Lakshmi Cement (strong presence in the north) and Heidelberg
(operating leverage and cost efficiency measures). Hence, we continue to recommend buy on these three stocks.
