Cement stock prices witnessed a slight improvement over the last six weeks. However, Mohan Krishnaswamy, RBS Equities (India) says he would be cautious on the cement space in the near-term.
In an interview to CNBC-TV18, he says, "We are fairly cautious. The sector has done better than our expectations. Ambuja Cement, ACC, Grasim and India Cements are his top picks from the sector. Meanwhile, the cement capacity utilisation rate dropped to 75% on a year-on-year basis in October 2011 versus 83% in October 2010. Sanjay Ladiwala, President, Cement Stockists & Dealers Association of Mumbai informed CNBC-TV18 that the current cement capacity utilisation stands roughly at 75%. "The northern regions are seeing a much higher utilisation while the south is seeing unfortunately because of far overcapacity as compared to the demand, a much lower utilisation of capacity," added. He expects the cement industry to grow roughly at 4.5% in FY12. Below is the edited transcript of their interview with CNBC-TV18. Also watch the accompanying video. Q: What is the sense you are getting? Is there a fall in the amount of under capacity utilization? Is capacity utilization improving? What went at all right in the last few months for the cement sector? Ladiwala: Well, traditionally we are expecting that post-monsoon there has to be an upward slope in the demand. That is what we are seeing at the moment. However, it is not appropriate to compare month-on-month figures because there are too many variables. It is a much longer base period to be coming to any sort of a conclusion. There is not that much on an average uptake in the demand as is being seen in the monthly figures. Appropriately, if one could take the six monthly figures it would show a trend which is not as healthy as is seen in the short-term. Q: Can you give us an idea of what sort of utilisation rate the entire cement business is working with? We learn that it fell to 75% on a year-on-year basis in October 2011 versus 83% in October 2010. Ladiwala: The figures are mostly correct. They are working at around 75% utilisation on an average though it differs from region-to-region. The northern regions are seeing a much higher utilisation while the south is seeing unfortunately because of far overcapacity as compared to the demand, a much lower utilisation of capacity. On an average, 75% would be an appropriate figure to go by. Going forth of course it will depend on the demand. Q: WhatDiscover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
