www.rupeedesk.in
Stocks of major cement makers are seen trading with a positive bias next week on hopes of demand picking up in the near term, which will give companies the opportunity to raise prices.
Demand for cement typically picks up in October, after remaining low in Jul-Sep due to monsoon. But in 2012, sales continued to remain weak after the rains as high interest rates stalled infrastructure and real estate activity.
Elections in some states also led to lower demand in Oct-Dec. With hopes of Reserve Bank of India cutting key policy rates in the current quarter to March, analysts are now of the view that demand from real estate and infrastructure sectors will revive in the coming months.
Some cement companies have already raised prices in west and south India in anticipation of demand rising. Short-term volatility not withstanding, we expect sustained volume recovery, slowing capacity addition and higher operating expenditure/capital expenditure cost to result in strong pricing.
This coupled with cost stabilization, albeit at higher levels, will drive profitability improvement and capital efficiencies.
