Sushil Finance has come out with its report on Cement space. According to research firm. one can remain invested in cement stocks for long term.
The cement industry plays a vital role in the economic development of the country and accordingly grows hand-in-hand along with the progress in construction industry and the GDP growth of the country. India has witnessed the similar trend for past several years. The cement industry in India has showcased a strong and steady growth for quite a long time withstanding the challenging economic phases. However, the last fiscal proved to be a major testing time for the industry. The cement manufacturers were taken aback not only because of the top-line hit on account of demand slowdown due to delayed infrastructure projects and slowdown in the real-estate sector, but also from the significant shrinkage in the profit margins as the input costs increased significantly. Accordingly, not only the revenues declined substantially but also the profitability fall considerably. The cement manufacturers depend a lot on the costs, availability and more importantly timely availability of coal, power and transportation. During FY11, the coal prices increased more than 30%, power costs went up by about 20% and the rise in crude have pushed up the transportation costs by 10%. Still the situation looked better than it actually was, as most of the cement companies were investing huge amount on expanding capacities which did not allow companies to pass on the increased costs completely. Thus, the subdued demand coupled with rising capacities alongwith skyrocketing input costs shaped a gloomy picture for the industry. Being the capital intensive industry, cement companies are usually highly leveraged. Thus, the margins were further impacted by the accelerating interest costs. Now, most of these aspects got factored into the stock prices compelling them to trade at the prices near the half of their last yearDiscover 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!
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