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We expect stocks of major cement companies to be subdued next week, as although the worst is over for the manufacturers, headwinds persist. Although rural demand has picked up, infrastructure spending continues to be a cause for worry. Cement prices are subdued now after rising in the beginning of December. As many companies are keen on keeping prices high, this is not the best time for a price hike. Companies that have come to terms with that have begun concentrating on cost optimisation. Despite the recent recovery in cement prices over the last two months, average cement prices are still marginally down year-on-year. Sales volume too has not picked up materially. Oct-Dec sales volume is expected to rise by a modest 6-7% quarter-on-quarter. Sales volume of all the three large cap companies ACC, Ambuja Cements, and Ultratech Cement would decline 2-3% year-on-year.
We remain cautious on the sector as demand-supply situation remains fragile. We advise investors to focus on companies with improving operational efficiencies and strong balance sheet which should help absorb the negative impacts of any demand disappointments going forward. Cement stocks have outperformed the markets by around 10% over the past three months. Hence, near-term performance could remain range-bound and closely track cement price movement. We continue to prefer UltraTech Cement and Shree Cement over ACC and Ambuja Cements.
We expect stocks of major cement companies to be subdued next week, as although the worst is over for the manufacturers, headwinds persist. Although rural demand has picked up, infrastructure spending continues to be a cause for worry. Cement prices are subdued now after rising in the beginning of December. As many companies are keen on keeping prices high, this is not the best time for a price hike. Companies that have come to terms with that have begun concentrating on cost optimisation. Despite the recent recovery in cement prices over the last two months, average cement prices are still marginally down year-on-year. Sales volume too has not picked up materially. Oct-Dec sales volume is expected to rise by a modest 6-7% quarter-on-quarter. Sales volume of all the three large cap companies ACC, Ambuja Cements, and Ultratech Cement would decline 2-3% year-on-year.
We remain cautious on the sector as demand-supply situation remains fragile. We advise investors to focus on companies with improving operational efficiencies and strong balance sheet which should help absorb the negative impacts of any demand disappointments going forward. Cement stocks have outperformed the markets by around 10% over the past three months. Hence, near-term performance could remain range-bound and closely track cement price movement. We continue to prefer UltraTech Cement and Shree Cement over ACC and Ambuja Cements.
