Most of the cement stocks are trading near their 52-week low on account of lower demand, stalling of construction activity during the monsoon season and excess capacity creation. But analysts see an uptick in demand with the recent awarding of projects by the government and expected revival of the rural demand post monsoon season.
Ambuja Cement last month breached its 52-week low creating a new low of Rs 197.40 on August 26, 2015. Other big cement manufacturers also trade near the 52-week low due to low price in markets across the country.
Ultra Tech Cement, the leader in the cement industry, on Thursday closed at Rs 2,978.15, much above its 52-week low of 2297 but below its 52 week high of Rs 3,398. Another Birla group company Grasim Industries closed at Rs 3468.90 near its 52-week low of Rs 3218.
Some of the mid-cap cement stocks like India Cements, Prism Cement and Mangalam Cement also trade near their one-year lows.
Binod Modi, research analyst, Reliance Securities, in a report based on dealers check on current cement prices in different parts of the country, said “Absence of capex revival in infrastructure and real estate segments are hurting demand for cement.”
“All-India average cement prices recovered moderately by around 3 per cent month on month mainly supported by substantial price recovery seen in northern region. Average price currently is prevailing around around Rs300 to Rs 305 per bag, there has been scanty rainfall in many pockets, which supported demand especially from trade segment,” Modi said.
Analysts expect a decent uptick in demand scenario from the second half of FY16 in the backdrop of expected pickup in construction activities especially from projects awarded in the last 6 months. Further, rural demand is also expected to pick up post monsoon season.
Dhananjay Sinha, head, institutional research, Emkay Global Financial Services, in the India Strategy report said, “In the near-term, demand is expected to remain under pressure and we expect recovery only in the second half of the financial year. In the last six months, demand has also been impacted due to slowdown in rural demand. Expected pickup in infrastructure spending by governments can resuscitate demand and counterbalance slowing demand from real estate sector.”
“Oversupply still remains a concern primarily in the southern region though prices have sustained at higher levels for a long time now,” analysts said.
Cement players have been adding capacity but cement demand has not matched the capacity expansion.
Angel Broking analyst Shrenik C. Gujrathi said, " For first quarter Mangalam Cement reported a disappointing set of numbers on the profitability front due to higher depreciation and interest expenses on account of new capacity addition."
According to a report by India Ratings, “The pan-India installed cement capacity increased to around 370 million tonne per annum (mtpa) in FY14 from around 350 mtpa in FY13 and the cement industry is expected to add another 51 mtpa capacity at a CAGR of 6.7 per cent over FY14-FY16 with the eastern region leading the addition with a share of 32 per cent followed by the northern region with a share of 25 per cent in the capacity addition.”
It is only Shree Cement in the cement sector that has outperformed others with its high profit as the stock trades at Rs 11,275 near to its 52-week high of Rs 12,249.
No comments:
Post a Comment