Cement Stocks Outlook For The Week – 25 to 29.09.2017

Cement Stocks Outlook For The Week – 25 to 29.09.2017

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Cement Stocks Outlook For The Week – 25 to 29.09.2017 )

Next week, stock of cement companies are seen weak due to concerns over demand for the commodity and the profitability of companies in the sector. Demand for cement has been subdued since June, which we attribute to the monsoon as well as disruptions caused by the implementation of the Goods and Services Tax on Jul 1. Typically, demand for the commodity falls during the monsoon every year, as construction activity almost comes to a halt because of rains. In the last two years, cement companies have acquired over 42 mtpa of capacity, but weak demand could thwart their plans of increasing production. Besides, operating on lower capacity could hurt the profitability of these companies. In a report, All-India cement prices remained flat in September, after falling 3.1% on month in August. We expect demand to rise from October, as the monsoon ends and the impact of disruptions due to GST is over. While demand is set to increase post-monsoon, there are sand
availability issues in states like Tamil Nadu and Uttar Pradesh which need to be solved. If not, it may delay a demand rebound. However, we remain positive about cement companies in the medium to long term, as we expect demand to improve because of higher infrastructure spending by the government. A pick up in the real estate market with To rise as US FDA hurdles may be resolved
focus on affordable housing and an increase in rural demand because of good monsoon rains are also seen aiding the growth in cement demand. The outlook for stocks in the cement segment next week is bearish.

Source : Cogencis Information Services Ltd.