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Stocks of major cement companies are seen up next week on hopes of a recovery in prices sometime during the month. Investors will keep an eye on UltraTech Cement and Jaiprakash Associates on media reports that the cement major may buy the latter's 4.8-mln-tn cement unit in Gujarat for around 34 bln rupees. An announcement in this regard is likely Sunday. The mood around cement sector stocks has begun improving. The market is seeing revival in demand post monsoon, especially from the rural areas. Demand for construction material has been subdued for the past eight months due to slowdown in infrastructure and housing activities. Companies have not been able to increase prices due to the low demand. Overall, cement prices in August were down 8% year-on-year and 5% quarter-on-quarter. The inability to hike prices affected margins.
In the Jul-Sep quarter too, companies are expected to post a dip in net profit due to low volume off-take and realizations. However, we believe the recent correction in stock prices have largely factored in the likely poor quarterly performance and they trade at reasonable valuations. Cement companies are seen raising prices in September on the back of improved demand. The consensus among dealers is that cement prices have bottomed out and they expect a recovery of 10-15 rupees per bag in a week's time.
Stocks of major cement companies are seen up next week on hopes of a recovery in prices sometime during the month. Investors will keep an eye on UltraTech Cement and Jaiprakash Associates on media reports that the cement major may buy the latter's 4.8-mln-tn cement unit in Gujarat for around 34 bln rupees. An announcement in this regard is likely Sunday. The mood around cement sector stocks has begun improving. The market is seeing revival in demand post monsoon, especially from the rural areas. Demand for construction material has been subdued for the past eight months due to slowdown in infrastructure and housing activities. Companies have not been able to increase prices due to the low demand. Overall, cement prices in August were down 8% year-on-year and 5% quarter-on-quarter. The inability to hike prices affected margins.
In the Jul-Sep quarter too, companies are expected to post a dip in net profit due to low volume off-take and realizations. However, we believe the recent correction in stock prices have largely factored in the likely poor quarterly performance and they trade at reasonable valuations. Cement companies are seen raising prices in September on the back of improved demand. The consensus among dealers is that cement prices have bottomed out and they expect a recovery of 10-15 rupees per bag in a week's time.
