K.Karthik Raja - Rupeedesk Advisory: Cement Stocks Outlook

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Cement Stocks Outlook for the week – 18 to 22.08.2014

( www.rupeedesk.in )

Stocks of major cement companies are expected to remain in the green during the week

as the general mood around the stocks is positive on expectations of a volume pick-up.

The ongoing monsoon, notwithstanding, cement sector stocks are likely to trade with a

positive bias as market sees green shoots on demand.

Cement volume growth showed rather encouraging signs during the Apr-Jun quarter with

pan-India production growth of 9.6% year-on-year.

UltraTech, JK Lakshmi and JK Cement posted 15% plus volume growth during

Apr-Jun, and ACC, Ambuja and Heidelberg reported 4-9% growth. However, volumes

declined for South-based companies such as Ramco, Dalmia and India Cements.

However, profitability improvement was not as sharp due to continuing cost increases,

particularly overheads.

Cement sector continues to provide best play on the potential cyclical recovery in

investment in the economy. Our preferred picks are UTCEM (UltraTech Cement) and

SRCM (Shree Cement) among large caps and JKCE (JK Cement) and JKLC (JK Lakshmi Cement) among mid-caps.

Cement Stocks Outlook for the week – 11 to 14.08.2014

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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.

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.

Cement Stocks Outlook for the week – 07 to 11.Jul.2014

Cement Stocks Outlook for the week – 07 to 11.Jul.2014

Stocks of cement companies are seen gaining ahead of the Union Budget, where the
infrastructure sector, especially the housing industry, is likely to get a big push. Allocation
towards infrastructure projects is likely to go up in the Budget. This hike may give a boost to
the cement industry. Extension of investment allowance of 15% for capex beyond FY15
(Apr-Mar), would drive cement demand from industrial segment.

Any concrete measure to boost urban housing, infrastructure, and industrial capital
expenditure will drive strong growth in cement and influence its pricing. The market expects
the government to reduce or remove the excise duty on imported coal and pet coke.

If this is done, the cement companies will get to save a lot of fuel cost, which in turn will
help them. In short-term, mid-cap companies are seen doing well, as their capacities are
just enough to handle demand, regardless of below-normal monsoon this year. Large-cap
companies are not attractive enough at the current levels, for the next week investors are
bullish on stocks of Jaiprakash Associates, India Cements and Ramco Cements

Cement Stocks Outlook for the week – 09 to 13.Jun.2014

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Stocks of major cement companies to trade with a positive bias next week, as prices of

the construction material are seen steady in the short-term, at least before the start of fullfledged

monsoon. In a last bid to gain some price realisation before the usually-lull

monsoon months, cement companies across the country have hiked prices by 10-60

rupees per 50-kg bag.

While the top three cement manufacturers--UltraTech, ACC, and Ambuja--have already

raised product prices, small players may implement the hike gradually in some parts of

the country. The price hike in southern India, particularly Andhra Pradesh, is high at 50-

60 rupees per bag, while the rise was in the range of 10-15 rupees in the rest of the

country.

Market on the whole is on a roll and cement sector stocks will also follow the trend.

There is a general optimism that things have bottomed out and demand will improve on

the back of revived construction and infrastructure sectors. Cement demand has grown at

around 6% annually in the last four years (2010-14), the slowest pace in past two decades

for four consecutive years.

The cement demand has been at a 13-year low at around 4% and is expected to grow at

9% in H2FY15/FY16 (Oct-Mar) on the back of revival in sentiments and unleashing of

pent-up demand against the dismal growth of 6% in FY10-14. Given this backdrop, we

like ACC on the back of attractive valuations and play on improved operations,

UltraTech and Shree cement, driven by strong quality of operations, While in mid caps,

we like Ramco cement and JK Lakshmi cement.

Cement Stocks Outlook for the week - 19 to 23.May.2014

Cement Stocks Outlook for the week - 19 to 23.May.2014
(www.rupeedesk.in)

Stocks of major cement companies will continue to be in the green next week

as the imminent formation of the Bharatiya Janata Party-led government at the

Centre is seen as a positive development for the economy. The movement in

stocks, however, will be range bound as market expects profit-booking to

follow this week's strong rally in the run-up to election results. A stable

government at the Centre was the need of the hour and now that it has been

established, market is optimistic that new infrastructure projects will see a

boost. The BJP-led National Democratic Alliance comfortably cleared the 272-

seat hurdle which represents simple majority or the half-way mark in the 543-

seat Lok Sabha.

This is probably the first time in almost three decades that a single political

party has bagged a simple majority. Although experts do not see an immediate

spurt in cement prices, demand is seen improving over time and, therefore,

volumes are seen improving. "Volume growth will come in the next 3-6

months," said H.M. Bangur, managing director, Shree Cement. Global ratings

agency Fitch said the new government can strengthen investments by a clear

strategy for fiscal consolidation, creating a low-inflation environment and

pushing structural reforms. UltraTech Cement will consolidate as it has run up

sharply.