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Stocks of cement majors are expected to be in the positive next week on likely
improvement in demand. Also, reports that ACC Ltd, UltraTech Cement Ltd, and
Ambuja Cements Ltd have hiked product prices by 10-15 rupees per bag across the
country in the last month are seen aiding positive sentiment. Jan-May is peak demand
season for cement and the price hikes help companies' operating margins improve. The
firming up of prices in the northern, western, and central regions indicates an improving
business environment for north-based cement players. While rural housing demand is
strong, demand growth is likely to pickup with the gradual pick up in government
infrastructure spend, as many stalled infra projects like Delhi Mumbai Industrial
Corridor, integrated township projects, roads, metro, ports, etc, have recently got
clearances.
We remain overweight on the sector with a medium-term view; UTCEM (UltraTech
Cement) and SCRM (Shree Cement) are our preferred picks owing to higher volume
growth expectations, better market mix, and efficient cost structure. We believe, as
utilisation improves, the pricing differential between large-cap cement companies and
their mid-cap counterparts will narrow down. The margins of mid-cap cement companies
Stocks of cement majors are expected to be in the positive next week on likely
improvement in demand. Also, reports that ACC Ltd, UltraTech Cement Ltd, and
Ambuja Cements Ltd have hiked product prices by 10-15 rupees per bag across the
country in the last month are seen aiding positive sentiment. Jan-May is peak demand
season for cement and the price hikes help companies' operating margins improve. The
firming up of prices in the northern, western, and central regions indicates an improving
business environment for north-based cement players. While rural housing demand is
strong, demand growth is likely to pickup with the gradual pick up in government
infrastructure spend, as many stalled infra projects like Delhi Mumbai Industrial
Corridor, integrated township projects, roads, metro, ports, etc, have recently got
clearances.
We remain overweight on the sector with a medium-term view; UTCEM (UltraTech
Cement) and SCRM (Shree Cement) are our preferred picks owing to higher volume
growth expectations, better market mix, and efficient cost structure. We believe, as
utilisation improves, the pricing differential between large-cap cement companies and
their mid-cap counterparts will narrow down. The margins of mid-cap cement companies
