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Stocks of major cement companies will continue their upward march during the week ahead on positive sentiments caused by revival in demand and the general good mood in the broader market. Stocks of cement companies rose as much as 10% during the last week and the trend is likely to continue for sometime. The market is on a roll. Investors are seeing value in stocks of cement companies as they put the 2013-14 (Apr-Mar) financial year behind and expect a brighter 2014-15. Significant operating leverage is expected to flow through to earnings of cement companies due to demand and pricing improving gradually, limited capital expenditure plans, and no need to raise capital over the medium term.
We estimate Indian cement companies have solid earnings growth potential, and forecast 28-30% over FY14-17, based on our view of recovering profitability and gradually improving demand. The investment bank chose 'UltraTech' as the top pick given its plans for capacity increases, investments in cost-saving initiatives, and good company strategy. We believe ULTC (UltraTech Cement) is the strongest contender for any attractive inorganic opportunities, given its size and balance-sheet strength.
Stocks of major cement companies will continue their upward march during the week ahead on positive sentiments caused by revival in demand and the general good mood in the broader market. Stocks of cement companies rose as much as 10% during the last week and the trend is likely to continue for sometime. The market is on a roll. Investors are seeing value in stocks of cement companies as they put the 2013-14 (Apr-Mar) financial year behind and expect a brighter 2014-15. Significant operating leverage is expected to flow through to earnings of cement companies due to demand and pricing improving gradually, limited capital expenditure plans, and no need to raise capital over the medium term.
We estimate Indian cement companies have solid earnings growth potential, and forecast 28-30% over FY14-17, based on our view of recovering profitability and gradually improving demand. The investment bank chose 'UltraTech' as the top pick given its plans for capacity increases, investments in cost-saving initiatives, and good company strategy. We believe ULTC (UltraTech Cement) is the strongest contender for any attractive inorganic opportunities, given its size and balance-sheet strength.
