Cement Stocks Outlook for the week - 23 to 27.03.2015
( www.rupeedesk.in )
Stocks
of major cement companies are expected to remain under pressure next week in
absence of any immediate positive sector-specific trigger. Fundamentals of the
sector still remain weak.
The
sector is yet to witness volume growth due to lack of demand from the
infrastructure sector.
With
no new big-ticket infrastructure projects proposed by the government and the
private
sector,
the demand for cement remained subdued in the last few months.
We
do not expect any improvement in the cement stocks next week. We do not see any
trigger unless the cement prices get increased during the week across all the
regions.
Cement
stocks will remain under pressure. Cement prices pan-India are weak excluding
South India. Fourth quarter has been down in terms of demand and prices
compared with the same period of previous years.
Acceleration
of the investment cycle, which is essential for higher demand growth, and
sustenance
of robust pricing is yet to materialise. Government's strong emphasis on infrastructure
projects augurs positively for a gradual revival of demand cycle. We continue
to prefer players with strong volume levers, efficient operations and healthy
balance sheet (or deleveraging visibility). We like UltraTech among large caps,
and JK Lakshmi, Dalmia Bharat and JK Cement among mid caps.
The
Street is unlikely to react to the news of Holcim and Lafarge renewing terms of
their merger.
The
companies have redrawn the terms of their proposed merger, with shareholders of
Lafarge getting 0.9 shares of Holcim for every share held. Holcim shareholders
will consider the new term on or around May 7 for approval.
Post
merger, we see shares of Ambuja Cements gaining more among all the three
companies to be merged. ACC Ltd would not gain because of its units likely to
be sold in merger process.
