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Stocks of major cement companies are seen declining in the week ahead as investors remain cautious in anticipation of disappointing Apr-Jun earnings. The Street will also continue to react to Holcim restructuring operations of Indian arms Ambuja Cements and ACC in a complex deal. UltraTech Cement is also likely to remain in focus during the week as it is slated to detail its earnings for the quarter ending June on Monday. The country's largest cement manufacturer by volume is expected to report a 21% on year decline in net profit at 6.17 bln rupees for the quarter under review. UltraTech Cement is likely to post net sales of 50.28 bln rupees, down just 1% on year. Low volumes and realizations amid slack demand are seen hitting earnings.
ACC and Ambuja Cements' Apr-Jun earnings have also been poor, though in line with market expectations. ACC and Ambuja Cements posted net profit decline of 37% and 31%, respectively. Although investor reaction to the Holcim-Ambuja-ACC deal has cooled down a bit, the negative sentiment will continue over Ambuja Cements for sometime as concerns over the 35-bln-rupee cash outgo and interest of minority shareholders remain.
However, see earnings of cement companies recovering sharply post October on account of improvement in prices and demand. Thus, we believe that near-term weakness in cement stocks can be used as opportunity by long term investors to increase their holdings.
Stocks of major cement companies are seen declining in the week ahead as investors remain cautious in anticipation of disappointing Apr-Jun earnings. The Street will also continue to react to Holcim restructuring operations of Indian arms Ambuja Cements and ACC in a complex deal. UltraTech Cement is also likely to remain in focus during the week as it is slated to detail its earnings for the quarter ending June on Monday. The country's largest cement manufacturer by volume is expected to report a 21% on year decline in net profit at 6.17 bln rupees for the quarter under review. UltraTech Cement is likely to post net sales of 50.28 bln rupees, down just 1% on year. Low volumes and realizations amid slack demand are seen hitting earnings.
ACC and Ambuja Cements' Apr-Jun earnings have also been poor, though in line with market expectations. ACC and Ambuja Cements posted net profit decline of 37% and 31%, respectively. Although investor reaction to the Holcim-Ambuja-ACC deal has cooled down a bit, the negative sentiment will continue over Ambuja Cements for sometime as concerns over the 35-bln-rupee cash outgo and interest of minority shareholders remain.
However, see earnings of cement companies recovering sharply post October on account of improvement in prices and demand. Thus, we believe that near-term weakness in cement stocks can be used as opportunity by long term investors to increase their holdings.
