Cement Stocks Outlook: Range-bound with positive bias

[K.Karthik Raja]

Cement Stocks Outlook: Range-bound with positive bias

MUMBAI - Hopes of cement price hikes and volatility in the broad
market is likely to keep shares of cement companies range-bound with a
positive bias next week.
On Thursday, cement companies hiked prices of the commodity in
Mumbai and Navi Mumbai by 5 rupees per 50 kg with immediate effect. In
this market, institutional buyers will have to pay 247-249 rupees a
bag, while retail prices will be over 268 rupees. Wholesale prices in
the trade segment will be 255 rupees.
ACC, UltraTech Cement, Ambuja Cements, JK Lakshmi Cement, Binani
Cement, and Indorama Cement, among others, hiked prices.
Cement dealers said price hike is likely in other parts of
Maharashtra as well in the next couple of weeks. In Mumbai itself,
some more hikes can be expected in the near term due to shortage.
"Last month, cement consumption in Mumbai was 700,000 tn against
average of around 625,000 tn. In addition to this rise in consumption,
the shortfall is nearly 7-8% in Mumbai," said Sanjay Ladiwala,
president, Bombay Cement Dealers' and Stockists' Association.
The shortage is despite 45,000 tn imported cement from Pakistan
coming into the Mumbai market in January, he said.
Until May-end, outlook for demand and prices is positive following
a
likely pick-up in construction activity in the country.
Cement dealers also expect some more hikes across markets in the
next couple of weeks.
"Shortage in cement supply is likely to take prices in western
region
15-20 rupees (per bag) higher until June.," Ladiwala said.
Outlook for February, according to cement dealers, is positive
with a
likely hike of 5-8 rupees per 50 kg in Gujarat, 3-5 rupees in
Maharashtra, and southern markets each.
Earnings performance of cement makers in Oct-Dec reflected the
cost pressure, especially related to power and fuel, and inability to
hike prices. However, hike in prices can help them offset cost
pressure to some extent.
Cement prices in Mumbai--a key market due to large construction
activity here--have been hiked after over two months. The prices were
last hiked by 5 rupees per 50 kg across Maharashtra on Dec 1.
.
STOCK VIEW
Among front line cement shares, charts of ACC are indicating a
strong upside hereon to 885 rupees, provided the stock tops the
resistance of 845 rupees.
Major support for ACC exists at 725 rupees.
Ambuja Cements is seen in neutral mode with a range-bound movement,
as the share is seen moving between 115 rupees and 132 rupees.We
expects Ambuja Cements to touch 146 rupees, if the share tops this
band.
Shares of UltraTech has the potential to move higher up to 925
rupees, and the share can find good support at 810 rupees. However,
890 rupees will be a key resistance that needs to be broken with good
volume to witness the upside to 925 rupees.
Weak trend is likely to continue for shares of Grasim Industries
that
logged over 7% loss in the week gone.Grasim is likely to find support
at 2,750 rupees, and a major support exists at 2,560 rupees,On any
upside, Grasim is seen facing resistance at 3,050 rupees.
In the near term, shares of India Cements are seen moving in the
range of 190 rupees and 225 rupees.India Cements can move towards 250
rupees, provided it breaks the range of 190-225 rupees with strong
volume.
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
Feb 8 Feb 1
.
ACC 779.95 755.90 3.2%
Grasim Industries 2,801.20 3,017.35 (-) 7.2%
Ambuja Cements 116.75 118.80 (-) 1.7%
India Cements 205.40 203.20 1.1%
UltraTech Cement 853.85 879.75 (-) 2.9%
.
Sensex 17464.89 18242.58 (-) 4.3%
Nifty 5120.35 5317.25 (-) 3.7%