Cement Stocks
Outlook for the week – 03 to 07.11.2014
( www.rupeedesk.in )
The week ahead looks positive for
stocks of cement companies as Jul-Sep earnings have been
good for major manufacturers and
optimism continues over renewal in post-monsoon demand.
We expect stocks of cement
companies to rally in the three-day trading week.
All three biggies -- UltraTech,
Ambuja, and ACC -- have posted good results. Smaller
companies, too, are expected to
keep up with the revival trend, especially South India-based
players.
The cement sector is set to move
to a high-growth trajectory over next three or four years led by
an improved macro outlook and
through the government's policy push.
We believe the industry's
capacity utilisation bottomed at around 69% in FY14 (Apr-Mar). We
think low capacity addition and
demand recovery should lift utilisation levels from hereon given
the cyclical upturn in the
economy coupled with an expected policy push to drive investments in
the infrastructure sector.
It said that by driving increased
cement usage in sectors like road, power and irrigation, the
industry can achieve the full
potential of cement demand growth over the next three or four
years.
Long-term growth in cement
production will result in a corresponding increase in thermal and
electrical energy requirements
for the sector, adding the industry can overcome the hurdles by
working creatively to improve
energy efficiency while increasing adoption of alternative sources.
We continue to prefer UltraTech
in the large-cap space. Among midcaps, we like JK Cement, JK
Lakshmi and Heidelberg Cement due
to their presence in strong regions and well-timed
expansions while India Cements
can be a major beneficiary of a strong demand revival in Andhra Pradesh.
