Cement Stocks Outlook: Further consolidation next wk, fall limited
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B. Karthick
Aug 23, 2008, 3:22:49 AM8/23/08
to Kences1
Cement Stocks Outlook: Further consolidation next wk, fall limited
Saturday, Aug 23
Most cement shares are seen consolidating further next week with
a limited downside amid absence of sector specific triggers.
Impending August derivatives expiry Thursday is likely to push
frontline stocks due to rollover from current series to September, as
August contracts of these shares have witnessed significant short
positions so far.
These short positions have been attributed to sluggish outlook for
cement pricing and profitability hereon.
Although cement prices may inch higher after monsoon due to rising
cost pressure, but it is unlikely to be more than 5 rupees per 50-kg
bag in western and northern regions in the next four-five months.
Most positives such as a likely price hike after monsoon and fall
in coal prices have already been factored into these shares.
Investors can now book profits in cement shares, as no significant
upside is likely from current levels.
We are cautious on the sector, as the pricing scenario is likely
to be weak hereon due to proposed expansion, restricting improvement
in profitability.
The industry is expected to commission capacity worth 32 mln tn in
2008-09 (Apr-Mar) and 47 mln tn in 2009-10, even with delays in
expansion.
Thursday, Swiss cement major Holcim also said margins of its India
operations--ACC Ltd and Ambuja Cements Ltd--are unlikely to improve
soon.
India operations, which account for more than half of Holcim's
Asia-Pacific regional sales, will take some time to improve margins
through efficiency gains and price adjustments the company said.
Holcim controls around 20% of India's cement market through around
45% stake each in ACC and Ambuja Cements.
STOCK VIEW
Technically expect cement shares to continue moving sideways next
week after witnessing profit booking in the week gone after having
risen for over a month.
Among frontlines, shares of ACC are likely to find major support
at 535 rupees, while level of 574 rupees is expected to prove as a
strong resistance next week.
Grasim Industries is expected to consolidate between 1,910 rupees
and 2,050 rupees next week.
However, the stock has potential to move up to 2,170 rupees.
India Cements is another stock that is likely to move sideways
between 134 rupees and 144 rupees.
Shares of Jaiprakash Associates that closed at 164.35 rupees this
week are expected to move towards 182 rupees next week, with support
seen at 156 rupees.
This week's closing prices, in rupees, of key cement shares, on
National Stock Exchange, compared with previous week:
Company Closing price Closing price % Change
Aug 22 Aug 14
ACC 559.15 609.55 (-) 8.3%
Grasim Industries 1,931.45 2,056.85 (-) 6.1%
Ambuja Cements 80.00 84.55 (-) 5.4%
India Cements 140.15 151.90 (-) 7.7%
Ultratech Cement 585.00 620.00 (-) 5.6%
Sensex 14401.49 14724.18 (-) 2.2%
Nifty 4327.45 4430.70 (-) 2.3%
End
B.Karthick
Research Analyst.
Saturday, Aug 23
Most cement shares are seen consolidating further next week with
a limited downside amid absence of sector specific triggers.
Impending August derivatives expiry Thursday is likely to push
frontline stocks due to rollover from current series to September, as
August contracts of these shares have witnessed significant short
positions so far.
These short positions have been attributed to sluggish outlook for
cement pricing and profitability hereon.
Although cement prices may inch higher after monsoon due to rising
cost pressure, but it is unlikely to be more than 5 rupees per 50-kg
bag in western and northern regions in the next four-five months.
Most positives such as a likely price hike after monsoon and fall
in coal prices have already been factored into these shares.
Investors can now book profits in cement shares, as no significant
upside is likely from current levels.
We are cautious on the sector, as the pricing scenario is likely
to be weak hereon due to proposed expansion, restricting improvement
in profitability.
The industry is expected to commission capacity worth 32 mln tn in
2008-09 (Apr-Mar) and 47 mln tn in 2009-10, even with delays in
expansion.
Thursday, Swiss cement major Holcim also said margins of its India
operations--ACC Ltd and Ambuja Cements Ltd--are unlikely to improve
soon.
India operations, which account for more than half of Holcim's
Asia-Pacific regional sales, will take some time to improve margins
through efficiency gains and price adjustments the company said.
Holcim controls around 20% of India's cement market through around
45% stake each in ACC and Ambuja Cements.
STOCK VIEW
Technically expect cement shares to continue moving sideways next
week after witnessing profit booking in the week gone after having
risen for over a month.
Among frontlines, shares of ACC are likely to find major support
at 535 rupees, while level of 574 rupees is expected to prove as a
strong resistance next week.
Grasim Industries is expected to consolidate between 1,910 rupees
and 2,050 rupees next week.
However, the stock has potential to move up to 2,170 rupees.
India Cements is another stock that is likely to move sideways
between 134 rupees and 144 rupees.
Shares of Jaiprakash Associates that closed at 164.35 rupees this
week are expected to move towards 182 rupees next week, with support
seen at 156 rupees.
This week's closing prices, in rupees, of key cement shares, on
National Stock Exchange, compared with previous week:
Company Closing price Closing price % Change
Aug 22 Aug 14
ACC 559.15 609.55 (-) 8.3%
Grasim Industries 1,931.45 2,056.85 (-) 6.1%
Ambuja Cements 80.00 84.55 (-) 5.4%
India Cements 140.15 151.90 (-) 7.7%
Ultratech Cement 585.00 620.00 (-) 5.6%
Sensex 14401.49 14724.18 (-) 2.2%
Nifty 4327.45 4430.70 (-) 2.3%
End
B.Karthick
Research Analyst.
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