Contrary to expectation of a volume pickup in the cement sector, both Ambuja and ACC disappointed the street on this front, says Murtuza Arsiwalla, senior analyst at Kotak Institutional Equities. UltraTech Cements on the other hand saw good volume pickup, he adds.
However, he explains that Ultratech is also a meaningfully larger company than ACC and Ambuja. Atleast in terms of India operations, Ultratech is ahead of the two other cement companies.
Arsiwalla has a sell on all these cement companies.
Below is the verbatim transcript of Murtuza Arsiwalla's interview with Latha Venkatesh & Anuj Singhal on CNBC-TV18.
Latha: Ambuja Cements results quite clearly didn't impress the street either. What is your comment, what’s going wrong there?
A: According to me it is interesting because if you look at the volume numbers contrary to expectations that we went into the quarter with where the macro data suggested the strong volume growth. If you look at the top three cement players barring UltraTech Cement both ACC and Ambuja showed sort of lack luster volume growth. ACC had a one percent growth, Ambuja marginal decline. Even in terms of realisations if you saw both ACC and Ambuja’s numbers the sequential increase was not as much as was anticipated.
More so in the case of ACC which has a more dominant south presence where prices were supposed to have picked up pretty dramatically so while some of the other names did reflect that UltraTech did see a sharp improvement sequentially in realisations. ACC and Ambuja’s were not as impressive as was the case with the UltraTech.
Anuj: Having said that UltraTech has outperformed quite a bit this year. Would you expect this kind of outperformance to then continue or would you expect ACC and Ambuja to may be reclaim some of the last ground?
A: If we look at UltraTech clearly among is meaningfully larger than the ACC and Ambuja in that sense there is a preference for the larger company. Having said that how the markets speculation on acquisition etc plays out that’s something that’s need to be seen from your own whether UltraTech does have ambitions to acquire assets globally etc will play a part on how stock performance is from here on. In terms of its India operations they have clearly demonstrated in this quarter that they are ahead of the other two in terms of ACC and Ambuja.
Latha: Do you cover JK Lakshmi Cement it's seemed to show fairly good improvements both in revenue and in margins?
A: Unfortunately we do not cover JK Lakshmi, we do not cover most of the midcap names. Generally speaking the volume growth etc in some of these names has been good and they do look more interesting especially from a valuation perspective. Given that the large-caps are trading and such rich valuations, lot of focus would now shift from here on to the midcap names.
Anuj: I believe you have a sell on Ambuja Cement what about ACC what’s your rating on that one and what’s the price target?
A: We have a sell on both ACC and Ambuja Cements.
Anuj: What about UltraTech, what's your rating there and the price target?
A: We have a sell rating out there as well.
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