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Stocks of major cement companies seen rangebound next week amid lack of any sector-specific triggers. News relating to Competition Appellate Tribunal's interim order in the price cartelisation case will be closely watched. On May 17, the tribunal stayed a Competition Commission of India's order of June and asked the panel not to take any coercive action until the next date of hearing. However, it asked the cement companies to deposit within a month 10% of the 63-bln-rupee fine imposed on them by the competition panel.
Cement companies affected by the order are ACC, Ambuja Cements, Binani Cement, Century Cement, India Cements, JK Cements, Lafarge India, Madras Cements, Ultratech Cements, and Jaiprakash Associates. These companies had challenged the competition panel's penalty on charges of cartelisation. Investors are also likely to keep a close eye on any price revisions, particularly in south India.
We see absence of meaningful seasonal cement price uptick as subdued demand growth restricts pricing powers for cement manufacturers. In fact we see some clear signs of weakness in pricing discipline as Andhra Pradesh cement price have now dipped to levels of 180 rupees/bag. At these levels we believe that most of the AP based producers are closer to break even cost of production.
Demand for the commodity typically falls post June, as construction activity across the country slows during monsoons, which is expected to hit Kerala in the beginning of June.
Shares of India Cements, which fell over 18% this week, will be in focus next week. Sentiment for the stock has been bearish since the company's Vice Chairman and Managing Director N. Srinivasan's son-in-law was summoned by the Mumbai Police in relation to the ongoing investigations relating to the Indian Premier League betting controversy. India Cements owns the Chennai Super Kings franchise of the IPL, which it had bought for $91 mln in 2008.
