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Stocks of cement companies are expected to follow the broader market in the absence of any sector-specific trigger, and the bias will be positive as the worst seems to be over in terms of demand. The bias for local share indices is seen positive next week after the National Stock Exchange's 50-share Nifty ended at a two-week high yesterday. Though cement consumption has improved especially in rural areas, it is still at a slower pace than expected. While infrastructure investments have clearly slowed down, thereby driving down cement consumption in India, pickup in rural/tier-2 cities' demand can bolster cement demand during FY15-16E (Apr-Mar) on account of the good agricultural output expected in FY14E.
Investors to focus on companies with improving operational efficiencies and strong balance sheet that should help absorb the negative impacts of any demand disappointments going forward. ACC & Ambuja Cements in the large cap space on account of their continued loss in market share as well as deterioration in their operational efficiencies. UltraTech, Shree Cement and JK Lakshmi Cements which have been industry leaders on the operational fronts. In our view, any dip in stock prices should be used. Explaining that while Ramco has been one of the most efficient cement companies in the southern regions. we would wait for its balance sheet to repair and demand pick-up in the southern region before we would upgrade it.
Stocks of cement companies are expected to follow the broader market in the absence of any sector-specific trigger, and the bias will be positive as the worst seems to be over in terms of demand. The bias for local share indices is seen positive next week after the National Stock Exchange's 50-share Nifty ended at a two-week high yesterday. Though cement consumption has improved especially in rural areas, it is still at a slower pace than expected. While infrastructure investments have clearly slowed down, thereby driving down cement consumption in India, pickup in rural/tier-2 cities' demand can bolster cement demand during FY15-16E (Apr-Mar) on account of the good agricultural output expected in FY14E.
Investors to focus on companies with improving operational efficiencies and strong balance sheet that should help absorb the negative impacts of any demand disappointments going forward. ACC & Ambuja Cements in the large cap space on account of their continued loss in market share as well as deterioration in their operational efficiencies. UltraTech, Shree Cement and JK Lakshmi Cements which have been industry leaders on the operational fronts. In our view, any dip in stock prices should be used. Explaining that while Ramco has been one of the most efficient cement companies in the southern regions. we would wait for its balance sheet to repair and demand pick-up in the southern region before we would upgrade it.
