www.rupeedesk.in
Enthusiasm around cement stocks will be low next week as companies are expected to post weak set of results for Oct-Dec. The country's largest cement maker UltraTech Cement Ltd will be in focus, as it is set to details earnings on Monday. UltraTech will more or less set the stage in terms of what to expect from Oct-Dec earnings of companies. However, market is not expecting great numbers because, unlike in other years, demand for cement this Oct-Dec did not see much improvement. Profitability is expected to be under pressure in Oct-Dec as well, after a weak Jul-Sep, as there has been a weak pricing trend and continued rise in energy costs and freight. UltraTech Cement is seen posting a 35% year-on-year drop in Oct-Dec net profit at 3.89 bln rupees. Though cement demand recovered marginally during Oct-Dec, mainly boosted by individual housing demand, on a year-on-year basis recovery is still weak. Cement prices also started improving since September-end and sustained till November. However, prices witnessed a decline during December 2013 due to lower-than- expected recovery in demand as well as inventory clearance by large players. All India average cement prices for the quarter ending December 2013 stood at 307 rupees per bag as against 297 rupees per bag average for Q2FY14
(Jul-Sep). The net revenue of cement companies is expected to decline by 1.4% on year on the back of 0.3% year-on-year fall in realisations at 4,331 rupees per tn and 1% fall in volumes at 5.9 mln tn. Operating margin on per tone basis is seen declining 13.5% to 460 rupees, while net profit is expected to slip by 29% to 1.7 bln rupees on weak operational earnings and lower tax last year. We maintain our Negative rating on ACC, ACEM (Ambuja Cements Ltd) and UTCEM (UltraTech Cement) on the back of uninspiring earnings outlook and expensive valuations. We continue to like SRCM (Shree Cement Ltd), backed by strong earnings outlook and attractive valuations.
Enthusiasm around cement stocks will be low next week as companies are expected to post weak set of results for Oct-Dec. The country's largest cement maker UltraTech Cement Ltd will be in focus, as it is set to details earnings on Monday. UltraTech will more or less set the stage in terms of what to expect from Oct-Dec earnings of companies. However, market is not expecting great numbers because, unlike in other years, demand for cement this Oct-Dec did not see much improvement. Profitability is expected to be under pressure in Oct-Dec as well, after a weak Jul-Sep, as there has been a weak pricing trend and continued rise in energy costs and freight. UltraTech Cement is seen posting a 35% year-on-year drop in Oct-Dec net profit at 3.89 bln rupees. Though cement demand recovered marginally during Oct-Dec, mainly boosted by individual housing demand, on a year-on-year basis recovery is still weak. Cement prices also started improving since September-end and sustained till November. However, prices witnessed a decline during December 2013 due to lower-than- expected recovery in demand as well as inventory clearance by large players. All India average cement prices for the quarter ending December 2013 stood at 307 rupees per bag as against 297 rupees per bag average for Q2FY14
(Jul-Sep). The net revenue of cement companies is expected to decline by 1.4% on year on the back of 0.3% year-on-year fall in realisations at 4,331 rupees per tn and 1% fall in volumes at 5.9 mln tn. Operating margin on per tone basis is seen declining 13.5% to 460 rupees, while net profit is expected to slip by 29% to 1.7 bln rupees on weak operational earnings and lower tax last year. We maintain our Negative rating on ACC, ACEM (Ambuja Cements Ltd) and UTCEM (UltraTech Cement) on the back of uninspiring earnings outlook and expensive valuations. We continue to like SRCM (Shree Cement Ltd), backed by strong earnings outlook and attractive valuations.
