Cement Stocks Outlook: In line with broad market next week

[K.Karthik Raja]

Cement Stocks Outlook: In line with broad market next week
Friday, Mar 7
.
CHENNAI: Shares of cement companies are seen moving in line
with the broad market, which has been witnessing volatility for the
last few weeks.
Downside for cement shares, however, is seen capped on hopes of
around 5-7 rupee hike per 50 kg in retail prices in the next couple of
weeks
In the week gone by, cement makers across India hiked prices of
bulk cement by at least 8 rupees with effect from Mar 2, to pass on
the hike in excise duty in Union Budget for 2008-09 (Apr-Mar).

On Feb 29, excise duty on bulk cement was raised to 14% ad-valorem
or 400 rupees per 1 tn, whichever is higher, in the Budget.
Earlier, bulk cement attracted a flat excise duty of 400 rupees
per 1 tn. Cement stocks reacted positively to this news, but closed
the week with decline in line with the benchmark indices, which fell
nearly 9% over the week.
However, bulk cement forms a small portion of companies'
despatches and therefore are unlikely to impact companies' earnings
significantly.
Although some companies have not effected the hike in bulk cement
yet, there are bleak chances of any rollback, cement dealers and
stockists said.
Retail prices are also likely to move higher on account of rise in
demand with pick up in construction activity, cement dealers said.
Improvement in construction activity across all regions and
inventory
pile-up created in January helped frontline cement companies report
robust rise in sales and production last month.
Demand for the commodity is likely to continue to be buoyant in
March, cement dealers and stockists said.
However, nearly 100% utilisation of installed operating capacity
is
likely to constrain cement makers.
"Supply is already short in the market, this would lead to hikes
in
retail prices. In Mumbai, lead time between order and despatches is
around seven days now, against normal average of three-four days," a
cement dealer said.
The latest hike in price was in February first week by 5 rupees in
Mumbai and Navi Mumbai.
.
STOCK VIEW
Shares of India Cements are seen moving in 201-212 rupees next
week, a technical analyst K.RAVI CHANDRAN said. He added that the
stock is likely to face major resistance at 215 rupees, which if
broken can take the stock to 228 rupees. Ambuja Cements shares are
seen finding major support at 115 rupees with upside target of 127
rupees, he said.
ACC is likely to outperform its cement peers as the stock is seen
in
neutral mode with positive bias, another technical analyst D.NARESH
KUMAR said. The stock is seen moving between 700 rupees and 785
rupees, he added.
He expects ACC to touch 840 rupees, if the stock tops 785 rupees
with strong volume.Grasim Industries is also seen in consolidation
mode.Grasim is likely to find support at 2,720 rupees, and a major
support exists at 2,560 rupees, analysts said adding on any upside,
the stock is seen facing resistance at 3,050 rupees.
Good support for UltraTech Cement shares is expected around 795
rupees,adding that the stock has potential to move higher up to 940
rupees, if it breaches 880 rupees.
.
This week's closing prices, in rupees, of key cement shares on
National Stock Exchange, compared with the previous week:
.
Company Closing price Closing price %
Change
Mar 7 Feb 29
.
ACC 734.85 795.95 (-) 7.7%
Grasim Industries 2,775.70 2,881.35 (-) 3.4%
Ambuja Cements 118.50 120.95 (-) 2.0%
India Cements 201.90 208.70 (-) 3.2%
UltraTech Cement 864.15 904.50 (-) 4.5%
.
Sensex 15975.52 17578.72 (-) 9.1%
Nifty 4771.60 5223.50 (-) 8.6%


K.Karthik Raja
www.kences1.blogspot.com