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.
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.
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.
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.
