Feb 24, 2012 02:34 PM IST | Source:

Sushil Fin bullish on cement sector; picks 5 midcap stocks

Sushil Finance has come out with its report on cement space.

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Sushil Finance has come out with its report on cement space.

The Indian cement makers shocked most of the people on the street by switching their orbits much ahead of their expectations, showcasing a complete turnaround performance for the quarter ended 31 December 2011. The cement sector had experienced a very difficult phase during most of the last fiscal and first half of FY12 on account of stumpy demand, elevated input costs, soaring interest rates and depreciating domestic currency. The situation was worsening as prices of key inputs in cement manufacturing such as coal and power kept towering. The bleeding cement companies were either working at stick-thin margins or were incurring losses. The stock prices were lingering around their all-time lows. Just an ideal time for investors to enter these stocks, we took the opportunity to initiate coverage on this sector with few highly undervalued cement stocks with a minimum upside potential of 30%. Since then the stocks have surged almost up to 60%.
The last quarter witnessed a smart recovery in the cement volumes which in-turn helped cement companies to pass on the rising input costs leading to expansion in their profitability. The surge in volumes driven by increased demand from infrastructure projects particularly from Government side and retail housing both in rural and urban areas led to improved utilizations which helped them partially offsetting high power, fuel and freight costs. Moreover, a price rise both in Northern and Southern regions after a long time was much awaited by the cement makers. Thus, higher realizations and improved volumes helped cement players to cloak a trajectory much above the street

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