Stocks of most cement majors are seen moving in a narrow range with a positive bias next week, as the negative sentiment of UltraTech Cement Ltd's poor Jul-Sep earnings has been factored in, and we expect cement makers performance to improve in the coming months. The country's largest cement maker by capacity, Thursday posted a 60% sequential decline in net profit for Jul-Sep at 2.79 bln rupees, and a 10% fall in net sales at 39.10 bln rupees.
UltraTech Cement reported Jul-Sep results below our as well as consensus estimates, on account of lower-than-expected margins. However, we see brighter prospects for H2FY12 (Oct-Mar) given the recent cement price hikes and expected spurt in volumes post-October as the festive season draws to a close.
We expected that even as two other majors, ACC Ltd and Ambuja Cements Ltd may miss the estimated growth for Jul-Sep, the companies will see a rebound in the coming quarters. ACC and Ambuja Cements will detail their Jul-Sep earnings on Nov 1. While pricing remained under pressure in Jul-Sep due to subdued demand, companies have taken production cuts to raise prices by 5-20 rupees per 50 kg bag across regions in the country since September end.
Cement producers have reduced production levels leading to shortage in the market with no sales in the non-trade segment and supplies being diverted to trade segment to exploit the premium of 10-15 rupees per bag. The low base effect of 2010-11 (Apr-Mar) might continue to help growth numbers seem better till January.
UltraTech Cement reported Jul-Sep results below our as well as consensus estimates, on account of lower-than-expected margins. However, we see brighter prospects for H2FY12 (Oct-Mar) given the recent cement price hikes and expected spurt in volumes post-October as the festive season draws to a close.
We expected that even as two other majors, ACC Ltd and Ambuja Cements Ltd may miss the estimated growth for Jul-Sep, the companies will see a rebound in the coming quarters. ACC and Ambuja Cements will detail their Jul-Sep earnings on Nov 1. While pricing remained under pressure in Jul-Sep due to subdued demand, companies have taken production cuts to raise prices by 5-20 rupees per 50 kg bag across regions in the country since September end.
Cement producers have reduced production levels leading to shortage in the market with no sales in the non-trade segment and supplies being diverted to trade segment to exploit the premium of 10-15 rupees per bag. The low base effect of 2010-11 (Apr-Mar) might continue to help growth numbers seem better till January.
