www.rupeedesk.in
The dull sentiment around cement sector stocks is likely to continue in the week ahead, as low demand continues to put pressure on companies' margins. The market will especially keep an eye on the financial results of cement majors Ambuja and ACC, which are set to detail their Apr-Jun earnings on Wednesday and Thursday, respectively. Both companies are seen posting a substantial year on year drop in net profit and flat-to-negative sales volumes, owing to low realisations and increased input costs. ACC and Ambuja are the country's second and third largest cement manufacturers respectively.
While 2QFY14 would continue to be a weak quarter in the wake of poor demand during the monsoon season, we believe the underperformance by cement stocks largely factors in the subdued performance. The sector has been facing demand crisis for the past six months now as infrastructure and housing activities are almost at a standstill. The early monsoon only made things worse.
However, the still bullish on the sector in the medium-to-long term and expect demand to revive in the second half (post-October) of the fiscal. They also see prices firming up after the monsoons, triggering an improvement in margins of cement companies. We thus expect cement companies to benefit from improvement in cement prices and hence we maintain our positive stance on the sector. Weakness in cement stocks during the monsoon should be used as a buying opportunity.
The dull sentiment around cement sector stocks is likely to continue in the week ahead, as low demand continues to put pressure on companies' margins. The market will especially keep an eye on the financial results of cement majors Ambuja and ACC, which are set to detail their Apr-Jun earnings on Wednesday and Thursday, respectively. Both companies are seen posting a substantial year on year drop in net profit and flat-to-negative sales volumes, owing to low realisations and increased input costs. ACC and Ambuja are the country's second and third largest cement manufacturers respectively.
While 2QFY14 would continue to be a weak quarter in the wake of poor demand during the monsoon season, we believe the underperformance by cement stocks largely factors in the subdued performance. The sector has been facing demand crisis for the past six months now as infrastructure and housing activities are almost at a standstill. The early monsoon only made things worse.
However, the still bullish on the sector in the medium-to-long term and expect demand to revive in the second half (post-October) of the fiscal. They also see prices firming up after the monsoons, triggering an improvement in margins of cement companies. We thus expect cement companies to benefit from improvement in cement prices and hence we maintain our positive stance on the sector. Weakness in cement stocks during the monsoon should be used as a buying opportunity.
