Cement Stocks Outlook for the week: 31.12.2012 -04.01.2013

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Stocks of domestic cement makers are seen firm next week as companies hiked the prices of the commodity earlier this week. Investors are likely to take cues also from the data on dispatches in December, scheduled to be released Tuesday. We maintain our view that the cement industry has gradually started to gear up for the cyclical upturn following improved fundamentals like narrowing demand-supply gap, sustained higher cement prices, rising capacity utilisation and moderation in cost inflation. We expects stocks of mid-cap companies to come in focus going forward. Stocks of cement companies may see some positive movement also as investors will start factoring in expectations that the companies' Oct-Dec earnings will be strong. Companies will detail their quarterly earnings beginning mid-January. With input costs stabilising somewhat, cement companies' realisations are expected to be higher in Oct-Dec. Also, companies raised cement prices after Jul-Sep, a seasonally weak quarter. Dispatches in Oct-Dec were higher sequentially. Ambuja Cements stocks are likely to remain in focus next week. Yesterday, Chief Executive Officer Ajay Kapur said the company is looking to set up a 5-mln-tn-per-annum integrated plant in Rajasthan. Ambuja Cements, the country's third largest cement maker by capacity, is awaiting approvals for the proposed plant, in which it would invest 20 bln rupees.

Cement Stocks Outlook for the week: 24 - 28.12.2012

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Stocks of cement manufacturers seen trading positive next week as demand for the commodity may rise going forward. Cement demand is seen getting a boost as the Bharatiya Janata Party won the elections in Gujarat, given the party's focus on growth and infrastructure development in the state. Gujarat accounts for 7-9% of all-India cement demand. We believe that the re-election of BJP (in Gujarat) will be positive for the infrastructure activities in the state and will drive the cement consumption in the state. The volumes of the western-based large cement players, like Ambuja Cements and UltraTech Cement, and small cement players, like JK Lakshmi Cement, Shree Cement and Jaypee Cement, are expected to increase. We sees large-cap companies--Ambuja Cements and UltraTech Cement--benefiting. In the mid-cap segment, we sees Shree Cement and JK Lakshmi Cement gaining from strong demand in Gujarat. Additionally, after the recent correction in cement prices that prices may not decline further. Demand is also likely to improve once industry enters into busy season. Thus, recent price corrections can be viewed as an opportunity for long term investors.

Cement Stocks Outlook for the week(03-07.12.2012)

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Stocks of cements companies will stay in a narrow range with a weak bias next week as data on companies' despatches in November is expected to be bearish.In October, the combined despatches of seven cement companies that reported their volumes was 4.7 mln tn, up 7.6% from a year ago and 5.9% higher sequentially. These companies were ACC, India Cements, Dalmia Cement, JK Cement, OCL India, JK Lakshmi Cement, and Mangalam Cement.

ACC's cement despatches rose 3.5% from a year ago to 2.04 mln tn. In September, the company had sold 1.80 mln tn cement. Construction activity had slowed down due to labour shortage as there was a short gap between Diwali and Muharram. In the corresponding period last year, construction activity had jumped.

We expect low demand could force the companies to roll back the price hikes effected earlier this year. Prices have been under pressure due to demand weakness and year-end competition by multinational companies.

Shares of cement companies could find support at lower levels due to value buying by long-term investors. People are looking to invest in these stocks and that is why, you will see a bounce-up in these stocks. Stocks in the sector are expected to underperform the benchmark indices in the next couple of months.

Cement Stocks Outlook for the week (12-16.11.2012)

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We expect some upside in major cement companies' Stocks next week, due to positive near-term outlook for the sector, they expect the recent rally in most cement counters to cap the rise. The rise may be capped as many cement counters are seen overvalued.  Sentiment for stocks of cement companies has remained positive for the past few months due to the recent uptick in demand across the country. Additionally, cement companies' performance during Oct-Dec is seen robust due to a low base.

We prefer ACC as current high valuations for companies in the sector have left little room for further out performance for stocks like UltraTech Cement and Ambuja Cements. With the increase in demand, companies have been able to raise prices of the commodity, which will help them post higher realisation on sales despite high input costs. We continue to be positive on the sector from a medium-to-long term perspective and prefer companies based on fundamental strong.

Cement Stocks Outlook for the week (05-09.11.2012)

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Stocks of major cement companies will likely rise next week if companies report higher cement despatches for October. Cement companies' shares, however, will track the broader market if the despatches data doesn't offer any major surprises. In case of a rally in the broader market, cement counters are likely to outperform because the near-term sentiment for the sector remains positive.

Slew of earning are due next week and traders believe that stock-specific moves will influence the broader market. Hindalco Industries, Reliance Power,
Reliance Infrastructure, State Bank of India, and Cipla Ltd are among the companies that are due to declare earnings next week.

Sentiment for the sector is also positive as the expected revival in the economy is expected to boost demand for cement from infrastructure and real estate companies. We are of the view that cement prices may see some rise in the near-term, helping companies to clock higher realisation on sales.

Cement Stocks Outlook for the week(22-26.10.2012)

Stocks of major cement companies are likely to remain rangebound next week after an action-packed week where heavyweights ACC and Ambuja Cements
announced lower-than-expected earnings for Jul-Sep. There may be some stock-specific movement in shares of companies that post their Jul-Sep earnings next week.

UltraTech Cement will remain in focus as the company will announce its Jul-Sep earnings on Saturday. Higher pricing and better realisation on sales are likely to aid UltraTech Cement post a whopping 99% year-on-year rise in net profit for Jul-Sep at 5.55 bln rupees. The company's net sales is seen rising 18% on-year to 46.03 bln rupees. On Thursday, Ambuja Cements posted a 77% year-on-year rise in net profit for Jul-Sep at 3.04 bln rupees, and 20% increase in net sales at 21.68 bln rupees.

ACC also posted a 48.4% year-on-year rise in net profit for Jul-Sep at 2.49 bln rupees on Thursday. Net sales for the quarter rose 13.7% from a year ago to
24.44 bln rupees. The net profit number was lower than market estimates because of high input cost the company had to bear, and net sales number was below expectations due to lower sales volumes. We expect that UltraTech Cement may also miss its Jul-Sep earnings estimates, but most believe that the company's performance is likely to be better than its peers.

Shares of mid-size cement makers such as JK Lakshmi Cement, Prism Cement, India Cements, and Madras Cements will also be in focus as these companies
announce their Jul-Sep earnings in the coming days.

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Cement Stocks Outlook for the week (08 -12.10.2012)

Stocks of major cement manufactures may see some profit booking next week, but the fall will be limited as the sector's strong fundamentals will keep investor sentiment upbeat. Leading the broad market rally, cement counters have gained significantly over the past few weeks, with most stocks trading close to their all-time highs, increasing expectations of profit sales. Fundamentally, however, cement companies appear to have everything going in their favour, making the sector a favorite among investors. Cement prices have remained strong for the past few months and are expected to rise further in coming weeks as the sector enters peak demand season. Typically, cement demand rises in Oct-Nov as construction activity picks up pace after a slump for three months during monsoon. Cement prices are also seen rising as companies will look to pass on the impact of the diesel price hike to consumers.

Yesterday, cement manufactures in Andhra Pradesh raised prices by 25 rupees per 50-kg bag, citing higher fuel prices and input costs. We believe Cement prices may be raised in other parts of the country next week. Investors are also bullish on the cement sector in anticipation of strong Jul-Sep earnings. We expect all companies in our coverage universe to report robust growth, except for India Cements, due to decline in sales volume and lower increase in realisation. Quarterly performance of Shree Cement would be better driven by robust sales volume growth and higher realisation. Ambuja Cement and Ultratech Cement's result would be better as cement prices in Gujarat have shown a rising trend. ACC's results would be driven by a lower base in 2QFY12 (Jul-Sep).

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Cement Stocks Outlook for the week (08 -12.10.2012)

Stocks of major cement manufactures may see some profit booking next week, but the fall will be limited as the sector's strong fundamentals will keep investor sentiment upbeat. Leading the broad market rally, cement counters have gained significantly over the past few weeks, with most stocks trading close to their all-time highs, increasing expectations of profit sales. Fundamentally, however, cement companies appear to have everything going in their favour, making the sector a favorite among investors. Cement prices have remained strong for the past few months and are expected to rise further in coming weeks as the sector enters peak demand season. Typically, cement demand rises in Oct-Nov as construction activity picks up pace after a slump for three months during monsoon. Cement prices are also seen rising as companies will look to pass on the impact of the diesel price hike to consumers.

Yesterday, cement manufactures in Andhra Pradesh raised prices by 25 rupees per 50-kg bag, citing higher fuel prices and input costs. We believe Cement prices may be raised in other parts of the country next week. Investors are also bullish on the cement sector in anticipation of strong Jul-Sep earnings. We expect all companies in our coverage universe to report robust growth, except for India Cements, due to decline in sales volume and lower increase in realisation. Quarterly performance of Shree Cement would be better driven by robust sales volume growth and higher realisation. Ambuja Cement and Ultratech Cement's result would be better as cement prices in Gujarat have shown a rising trend. ACC's results would be driven by a lower base in 2QFY12 (Jul-Sep).

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Cement Stocks Outlook for the week: 01.10.2012-05.10.2012)

Stocks of major cement companies are seen rising next week, but investors will eye despatches data for September before taking a medium-term view on the sector. Sentiment for the sector is positive and next week also we should see some rally in cement counters unless there is some unexpected disappointment in despatch data.  Additionally, the rise in some stocks may be capped due to profit sales.

Shares of cement majors rose significantly this week due to the bullish sentiment for the sector, with shares of ACC, Ambuja cement and UltraTech Cement touching life-time highs. Wednesday, Credit Suisse raised the price target for the top three cement players noting that they are likely to benefit from easing cost pressures and strength in cement prices.

Shares of UltraTech Cement are likely to remain in focus next week, after the company was included the 50-share Nifty index on Friday. Shares of Dalmia Bharat Enterprises may be in the spotlight after the company announced acquisition of Adhunik Cement, which owns a 1.5-mln-tn cement unit at Meghalaya. The acquisition was completed for a consideration of 5.60 bln rupees.

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Cement Stocks Outlook for the week (24-28.09.2012)

Stocks of major cement companies are seen tracking broad market next week due to lack of any sector-specific triggers. We expect some correction in cement companies' shares in the medium term, as most of these scrip are trading close to their life-time highs and are seen as overvalued.

Stocks of ACC and Ambuja Cements saw minor corrections during the week, as the two stocks have been trading close to their life-time highs since the past couple of weeks. Stocks of Jaiprakash Associates rose 13% during the week, after having taken a beating for over past two months. The company's shares also benefited due to its exposure to the infrastructure and power sectors. Investors are hopeful that the government may announce some reforms for these key sectors, which may benefit Jaiprakash Associates.

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Cement Stocks Outlook for the week: 17.09.2012 - 21.09.2012

Stocks of major cement manufacturers are seen in a band next week, and take cues from the market movement. Cement prices have reportedly softened in parts of the country due to slump in construction activity because of recent rains. But a strong market has seen stocks of most cement companies rise 1-9% week-on-week. (Cement) Prices in September have softened further (as we expected) inmost regions (except Ahmedabad) after reaching all-time highs in July. Poor demand in most regions as the main cause of this weakness. Despite price correction in Hyderabad, we continue to maintain that south is likely to see relatively stable pricing compared with the rest of India. The negative sentiment due to weak cement demand has been overshadowed by improvement in market sentiment after the government hiked diesel price. Technically, Stocks of Ambuja Cements and UltraTech Cement are close to their life-time highs and may consolidate in the next few trading sessions.

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Cement Stocks Outlook: 10-14.09.2012

Stocks of most cement companies are seen trading with a positive bias this week. The possible upside for the cement sector this week is 3-5%. While technicals  are positive on the sector's stocks, some fundamentals neutral citing lower despatches due to rains and the lack of other driving factors. We are neutral towards the cement sector at this point. The despatches have been impacted by the recent pick-up in the monsoons. Cement prices are expected to remain weak in the near term as construction activity has slowed on account of the monsoon rains. However, prices are expected to rise after the end of monsoon. The price of cement declined by 12-15 rupees a bag in August in most parts of the country on account of the rains. The four-month monsoon season began on a weak note in June, but picked strength last month. The all-India rainfall was 100% of the long-period average in August.

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Cement Stocks Outlook for the week (27-31.08.2012)

Stocks of major cement companies are seen in a narrow range next week amid lack of sector-specific triggers. Some stock-specific action in the sector is possible. Next week, stocks of cement companies may track the market. The next trigger for the sector will come from the data on cement despatches in August, to be released on Sep 1.

This week, stocks of India Cements and Madras Cements rose more than 6% due to attractive valuations. Shree Cement shares rose 5% after the company Thursday reported better-than-expected earnings for Apr-Jun. In Apr-Jun, Shree Cement's net profit surged to 3.51 bln rupees from 550.1 mln rupees a year ago due to improved realisations and sales volumes. Net sales in the quarter increased 43% to 145.53 bln rupees.

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Cement Stocks Outlook for the week (21-24.08.2012)

Stocks of major cement companies are expected to move in a narrow range with a positive bias next week. India’s financial markets are shut Monday for Id-ul-Fitr. Market participants expect demand for cement to be good this monsoon season as rains have been below normal. Usually, demand for cement falls in the season as construction activity stops due to rains.

Firm demand has led to increase in cement prices. "All-India average cement prices (in July) stood at 305 rupees/bag, an increase of around 10 rupees/bag month-on-month. The firming up of the prices was driven by a delay in monsoons coupled with an increase in freight and raw material costs. Also, the Apr-Jun earnings of most cement manufacturers have been good, which has boosted sentiment on the stocks of these companies.

Shree Cements, however, was among the companies that disappointed with their Apr-Jun numbers. This week, the stock fell as the company's net profit in the quarter declined 39% from a year ago to 620.7 mln rupees. Exceptional loss of 200 mln rupees, foreign exchange loss of 250 mln rupees, and sharp rise in finance costs dragged down the company's bottomline.

Next week, UltraTech Cement shares are seen trading with a positive bias.

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Cement Stocks Outlook for the week (13-17.08.2012)

Stocks of major cement companies are seen rangebound with a positive bias next week as demand for cement remains better than expected due to a deficient monsoon. Sentiment for the sector also remains positive after most cement manufacturers posted strong numbers for Apr-Jun earlier this month. We believe that the worst is behind for the cement industry.

After the recent outperformance, cement stocks are trading at historical average valuations, leaving limited room for further re-rating. We expect strong earnings growth to drive stock performance, hereon. Ambuja Cements and UltraTech Cement are the top picks in the large-cap and while Shree Cement is its favoured stock in the mid-cap.

Next week, India Cements will be in focus as the company will report its Apr-Jun earnings on Monday. This week, stocks of the company fell 1.6% to 85.60 rupees. Stocks of Shree Cement will be eyed, as the company will announce its Apr-Jun earnings on Thursday. This week, the company's stocks rose 2.4% to 3,181.70 rupees.

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Cement Stocks Outlook for the week (06 - 10.08.2012)

Stocks of major cement companies are likely to track the market trend next week due to lack of any sector-specific triggers. There may be profit booking in some cement stocks as these have rallied aggressively over the past few weeks on robust Apr-Jun earnings. Stocks have also moved up as companies continued to see higher-than-expected sales through July due to weak monsoon. Typically, cement sales start falling from June as construction activity across the country slows due to rains. On Thursday, Ambuja Cements said its July cement despatches rose nearly 6% on year to 1.7 mln tn and its production increased 1.1% to 1.7 mln tn.  However, profit booking in the stocks is likely to be limited as cement stocks are seen strong performers in the near-term.
Costs for cement makers have stabilised, sales have remained stable-to-marginally lower despite the seasonality, so things are pretty good for cement makers. There will be profit booking in the short-term, but in the medium-to-long term cement counters are a safe bet. After a decline in prices in Apr-May, prices recovered again in Jun-Jul mainly due to supply shortage. This coupled with delayed monsoon has given producers extra window to push up prices. This recent hike will undoubtedly become a cushion for the seasonal fall in cement prices with the pick up in monsoon and is likely to positively surprise the street on the realisation front. The market doesn't seem to succumb to the pressure of the recent penalties levied by the Competition Commission of India. Stocks of Shree Cement rose nearly 2% this week, despite the CCI levying a penalty of 3.97 bln rupees on the company charges of cartelisation.

Cement Stocks Outlook for the week (30.07.2012 - 03.08.2012)

                         Movement in stocks of major cement makers is likely to be stock- specific next week as investors look at companies' Apr-Jun earnings to take a view on the scrip. Ambuja Cements, which rose nearly 8% this week after it posted a rock solid performance in Apr-Jun, may rise more next week. Improved realisation, and high sales volumes took Ambuja Cements' net profit for Apr-Jun up 35% year-on-year to 4.69 bln rupees, marginally higher than Street expectations. The company's net sales rose 18% to 25.66 bln rupees. Stocks of ACC may also trade slightly up, reacting to satisfactory earnings for the quarter, but the upside is likely to be limited. The company posted a 26% on-year increase in net profit at 4.14 bln rupees on the back of a 15% rise in net sales at 29.19 bln rupees. 

                     The current market price adequately factors the improving sectoral outlook and ability of the company to capitalise on the same. Jaiprakash Associates stocks, which fell over 10% this week on expectations of poor Apr-Jun earnings, may see some more fall, but the same will be capped. Jaiprakash Associates is seen posting an only 2% rise in Apr-Jun net profit driven by realisations from its cement business. The company will detail its quarterly earnings on Tuesday. Cement volume (ex-Jaypee Cement Corp) is likely to be 4.3 mln tn; while blended realisation is expected to rise 0.4% on year to 3,672 rupees per tonne. Street is also likely to watch Andhra Cements' Apr-Jun earnings Wednesday, Madras Cements' results on Thursday, and India Cements' numbers on Aug 13.

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Cement Stocks Outlook for the week (16 20.07.2012)

 Cement Stocks Outlook for the week (16 20.07.2012)

Stocks of major cement companies are seen trading in a range with an upward bias next week mainly on expectations of strong earnings in the quarter ended June.
Most cement makers will announce Apr-Jun earnings later in the month. UltraTech Cement will post its earnings on Jul 20.

Cement companies are likely to report strong profit growth (year-on-year) backed by improved margins and a pick-up in volumes over a low base. We expect revenue growth of 15.5% year-on-year... in Q1FY13 (Apr-Jun).

Cement demand across the country remained strong during the June quarter, which led companies to keep prices at elevated levels. This will help cement
makers post robust operating profit margins for the quarter. However, though cement prices have been strong in recent months, they may fall now due to onset of monsoon, which is likely to limit the upside.

Onset of monsoon is a negative factor (for cement companies) and this will keep sentiment subdued in the sector. Arrival of monsoon brings construction activity to a standstill, which hurts demand for cement in the domestic market.

Shares of most cement companies have factored in news of Competition Commission of India's slapping hefty penalties on 11 companies found guilty of cartelisation.

The companies found guilty were UltraTech Cement, ACC, Ambuja Cements, India Cements, Madras Cements, Lafarge India, Jaypee Cements, Century Cement,
Binani Cement, JK Cement, and Grasim Cements--which was merged with Ultratech Cement.

These companies have been penalised 50% of their respective net profit for financial years 2009-10 (Apr-Mar) and 2010-11. Since the companies have decided to challenge the order in the Competition Appellate Tribunal, its impact will not have any further impact on stock prices.

Cement Stocks Outlook for the week (09 - 13.07.2012)

Cement Stocks Outlook for the week (09 - 13.07.2012)

Stocks of leading cement companies are seen gaining in the next five sessions on expectations of strong earnings in Apr-Jun. Most cement makers will announce June quarter earnings later this month. We expect Q1FY13 (Apr-Jun) to be yet another strong quarter for cement companies. Accordingly, the top 3 cement stocks have outperformed broad indices by 45-75% year-on-year. Cement demand across the country remained strong during Apr-Jun, which led companies to keep prices at elevated levels. This will help cement makers to post robust operating profit margins for the quarter. Earnings before interest tax depreciation amortisation per tonne is expected to increase both year-on-year and quarter-on-quarter. Average all-India cement prices are expected to be higher by 11% YoY and 5.5% QoQ, while average cost per tonne is likely to be up 8-9% YoY and 4% QoQ.

We expect sales volumes for the industry to have risen around 9.5% year-on-year in Apr-Jun, mainly due to a low base effect. On the back of this positive sentiment, stocks of most cement companies have been trading positive for the past three weeks, despite the Competition Commission of India levying hefty penalties on 11 companies found guilty of cartelisation. The companies found guilty were UltraTech Cement, ACC, Ambuja Cements, India Cements, Madras Cements, Lafarge India, Jaypee Cements, Century Cement, Binani Cement, JK Cement, and Grasim Cements which has merged with Ultratech Cement. The companies have been penalised 50% of their respective net profit for financial years 2009-10 (Apr-Mar) and 2010-11. The impact of this order is unlikely to be seen in the near-term as most companies have decided to challenge the order in the Competition Appellate Tribunal.

Seasonally, news flow regarding volumes and pricing is likely to weaken owing to onset of monsoon. However, structurally, we remain positive on the sector as we expect utilisations and prices, hence margins, to trend upward year-on-year.

, pred� m e � @ rojection of only moderate improvement in RIL's refining margin and a bottoming out of petrochemical margins.
er} � e � @ headroom for upside potential following the recent rally in the stock.