Cement Stocks Outlook for the week (06 - 10.08.2012)

[rupeedesk]

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.

By RUPEE DESK

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