Cement sector on an uptrend. Will you bet on it?

ACC BSE | NSE 30/05/12 Are Mutual Funds betting on ACC? Other Stocks in this news Grasim Industries | Ambuja Cements | India Cements | Kesoram Industries | Orient Paper and Industries | NCL Industries | Shree Cements | Mangalam Cement | Andhra Cement | Chettinad Cement | Prism Cement | Century Textiles and Industries | UltraTech Cement | Dalmia Bharat Sugar and Industries | JK Cement | Madras Cements |

Out of 35 cement companies that have reported their June quarter results, 22 of them have reported profits on quarter-on-quarter basis and this was despite monsoons lashing various parts of the country. Historically, cement sector witnesses a slowdown in June as construction activity stops with the onset of monsoons.

 

The list of 22 companies are led by Andhra Cement , with its Profit After Tax, PAT, beefing up by 721.08% as against the March quarter. The list also includes good fundamental companies like India Cement , Madras Cement , Chettinad Cement , JK Cement , ACC , Shree Cement , Prism Cement , with each of their profits gaining by 316.54%, 142.17%, 109.12%, 101.22%, 72.24%, 48.89%, 46.13% respectively.

 

Company	June 2006(Rs cr)		Mar 2006(Rs cr)		Net sales G/L (%)	PAT Gain (%)
	Net Sales	PAT	Net Sales	PAT
Andhra Cements	3.98	50.25	3	6.12	24.62	721.08
Shiva Cement	6.98	0.98	6.37	0.16	8.74	512.50
Keerthi Indus	20.14	5.31	15.59	1.09	22.59	387.16
India Cements	485.23	112.59	422.76	27.03	12.87	316.54
Sagar Cements	28.38	10.05	25.35	3.6	10.68	179.17
Guj. Sidhee Cem.	93.88	9.26	89	3.4	5.20	172.35
Madras Cement	340.89	78.85	299.84	32.56	12.04	142.17
Ckoramaandel	10.51	1.01	9.42	0.48	10.37	110.42
Chettinad Cement	173.6	28.65	124.44	13.7	28.32	109.12
OCL India	181.31	23.67	177.77	11.56	1.95	104.76
J K Cements Ltd	279.5	33	245.9	16.4	12.02	101.22
Amb. Cem. East.	179.5	44.5	151.49	25.81	15.60	72.41
A C C	1424.7	405.58	1321.8	235.48	7.22	72.24
JK Lakshmi	188.74	38.85	179.78	23.7	4.75	63.92
UltraTech Cem.	1180.32	210.84	1060.35	132.11	10.16	59.59
NCL Inds.	46.55	6.17	45.27	4.04	2.75	52.72
Sainik Finance	2.82	0.42	2.84	0.28	-0.71	50.00
Shree Cement	309.39	90.39	225.5	60.71	27.11	48.89
Prism Cement	178.07	35.64	167.1	24.39	6.16	46.13
K C P	52.48	10.16	45.58	7.23	13.15	40.53
Anjani Portland	21.11	3.25	10.86	2.53	48.56	28.46
Guj. Ambuja Cem	1134.24	303.89	924.29	298.59	18.51	1.78
Source:- Capitaline Plus

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

It seems Mutual Funds also took interest in cement and construction stocks in July as they added them in their clients list. They added cement stocks like Gujarat Ambuja Cement , India Cements.

There have been two factors which could have been a negative for the sector. One foreign institutional investors, FIIs, reducing their holdings in July in cement majors like ACC, Dalmia Cement , Gujarat Ambuja Cement, India Cement, Prism Cement, Shree Cement. Two,  cement was one of the sectors to pull down the infrastructure growth story by 5.1% in May 2006 as compared to 8.1 per cent in the same month last fiscal, may prove negative for the sector. However, these did little to dent the growth of the sector as experts say in the long run cement will pay. 

Positive factors like robust domestic demand, number of SEZ projects coming up in the country, capex cycle of corporate and strong housing demand seem to be outweighing the negatives as experts advice investors to bet on the sector. 

According to HDFC Sec research report, Indian cement industry registered a 13% year-on-year growth in dispatches in July, and also the prices have remained firm and were not affected by the monsoons. Hence, this resulted in a 27.5% increase YoY. Central and southern regions primarily led the growth.

 

Experts say that the sector will see no new capacity addition till the end of 2007. But this is unlikely to dampen the demand off take because cement is one commodity that is not operated at its full capacity.

 

SP Tulsian, Investment Advisor, says, "Right now most of the cement companies are operating at 100% capacity utilization and have the potential to operate at 130% capacity utilization even if there are no additions in terms of capacity."

 

Expert pick on page 2