Cement Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Cement Stocks Outlook for the week – 29.12.2014 to 02.01.2015

Stocks of most cement companies are seen trading down next week because of profit booking. However, some long-term investors may look to build position in stocks such as UltraTech in anticipation of a pick-up in demand during Jan-Mar.

The continued slackness in secondary sales/real Demand during December despite weak base in October and November. Given the elevated inventory levels and onset of calendar yearend discounts, prices are expected to remain weak in December.

We are bullish on UltraTech Cement after its acquisition of cement units of Jaiprakash Associates early this week. Under the deal, the Aditya Birla Group company will acquire two cement manufacturing plants of Jaiprakash Associates in Madhya Pradesh for 54 bln rupees.Post acquisition, UltraTech's capacity is likely to increase to nearly 65 mln from 60 mln tn at present. The company also has plans to further increase capacity to 71 mln tn by end of 2015- 16 (Apr-Mar).

Increased capacity in MP (Madhya Pradesh) is likely to increase UltraTech Cement's market stock and give the company ready access to completed plant. Thus, this deal is likely to positive for UltraTech Cements with a long term view. UltraTech is well prepared to ride the impending upturn coupled with premium profitability and healthy balance sheet make it the most attractive bet in cement universe.