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Stocks of major cement companies are expected to be in the positive during next week, as demand for cement is seen reviving on the back of good monsoons. Cement sector stocks have almost bottomed out. Market has finished reacting to Jul-Sep earnings of companies, and now it will act on the demand situation for cement, which is looking better now. Cement companies have been facing low realisations due to a slump inofftake for some months now, and this was reflected in their Apr-Jun as well as Jul-Sep earnings. Cement majors such as UltraTech Cement, Ambuja Cements and ACC have posted 45-52% drop in their Jul-Sep net profits disappointing market their shares haven't taken that much of a beating as the sentiment is positive around their performance hereon. Every year, cement prices increase after the monsoons, when construction picks up. Assuming demand recovery of 7% in H2FY14 (Oct-Mar), we estimate industry to grow 4.5% in FY14 (Apr-Mar). We expect hike in prices further post-Diwali. The quantum would depend upon the demand situation then. Also, the sector is expecting infrastructure spending to gradually begin as General Elections is scheduled for Apr-May. Over the last 22 years, every general election in India, has seen cement demand pick up sharply in the six months prior.
Stocks of major cement companies are expected to be in the positive during next week, as demand for cement is seen reviving on the back of good monsoons. Cement sector stocks have almost bottomed out. Market has finished reacting to Jul-Sep earnings of companies, and now it will act on the demand situation for cement, which is looking better now. Cement companies have been facing low realisations due to a slump inofftake for some months now, and this was reflected in their Apr-Jun as well as Jul-Sep earnings. Cement majors such as UltraTech Cement, Ambuja Cements and ACC have posted 45-52% drop in their Jul-Sep net profits disappointing market their shares haven't taken that much of a beating as the sentiment is positive around their performance hereon. Every year, cement prices increase after the monsoons, when construction picks up. Assuming demand recovery of 7% in H2FY14 (Oct-Mar), we estimate industry to grow 4.5% in FY14 (Apr-Mar). We expect hike in prices further post-Diwali. The quantum would depend upon the demand situation then. Also, the sector is expecting infrastructure spending to gradually begin as General Elections is scheduled for Apr-May. Over the last 22 years, every general election in India, has seen cement demand pick up sharply in the six months prior.
