Cement Stocks Outlook: Seen sideways next wk; Aug despatches eyed

[B. Karthick]

Cement Stocks Outlook: Seen sideways next wk; Aug despatches eyed
Saturday, Aug 30

Cement shares are seen moving sideways with negative bias next
week as frontline companies are likely to report flat to moderate
growth in output and despatches for August.
Monthly cement sales and output of companies is likely to be
impacted due to monsoon and planned maintenance shut downs at plants.
We expect cement sales to improve after monsoon, as construction
activity is likely to be revived.
Cement prices are also expected to move upward post-monsoon due to
rise in demand. However, the rise in cement prices may not be more
than 5 rupees per 50-kg bag in western and northern regions in the
next four-five months.
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.
Morgan Stanley expects cement prices in India to decline 12-15% by
2009-10 (Apr-Mar), after five successive years of rise, due to
significant supply addition pushing industry-wide capacity utilisation
to below 80% from around 100% now.
Currently, pan-India average cement price is around 230 rupees.

STOCK VIEW
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.
14-24% fall in cement shares in the last three months.
Technically we expect cement shares to continue moving sideways
next week.
Shares of ACC are likely to find support at 535 rupees, resistance
for the stock can be expected around 575 rupees.
Ambuja Cements is likely to move between 77.50 rupees and 82
rupees. The stock may fall to 73 rupees, if it pierces below key
resistance of 77.50 rupees.
Grasim Industries is expected to consolidate between 1,850 rupees
and 1,970 rupees.
India Cements is likely to move towards 142 rupees with key
support at 136 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 29 Aug 22

ACC 562.35 559.15 0.6%
Grasim Industries 1,938.10 1,931.45 0.3%
Ambuja Cements 80.30 80.00 0.4%
India Cements 138.45 140.15 (-) 1.2%
Ultratech Cement 591.05 585.00 1.0%

Sensex 14564.53 14401.49 1.1%
Nifty 4360.00 4327.45 0.7%

End


B.Karthick
Research Analyst.