UBS:: Indian Cement Industry - June volumes: ACC/Ultratech rises 7%/2%, Ambuja drops 2%

Please Share:: India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��


UBS Investment Research
Indian Cement Industry
June volumes: ACC/Ultratech rises 7%/2%,
Ambuja drops 2%
 
„ Event: June volumes—ACC/Ultratech +7.3%/+2%, Ambuja -1.8% YoY
June cement dispatches for Ambuja Cements (Ambuja) declined 1.8% YoY (1%
YoY including clinker) and 3.7% MoM to 1.66mt. ACC’s volume rose 7.3% YoY
to 1.9mt (-4% MoM), mainly led by a 3mt expansion at Wadi. UltraTech Cement’s
(UltraTech) dispatches increased 2% YoY to 3.2mt (-0.7% MoM). Dispatches
from July 2010 to June 2011 for Ultratech/ACC/Ambuja rose 1.5%/6.1%/2.2%
YoY.
„ Impact: Demand remains weak
The dispatches of large companies suggest weak demand. Dispatches for ACC rose
11.8% YoY and those for UltraTech/Ambuja declined 2.3%/4.7% YoY YTD
(April-June). Industry dispatches increased 4.8% in FY11, the lowest increase in
the past ten years (7.4% CAGR). Industry data after March 2011 is not available.
„ Action: We remain cautious on the sector
We are cautious on India’s cement sector as: 1) we expect industry over-capacity
to remain in FY12 due to large capacity additions; 2) demand is weak; 3) cost
pressures should remain given rising input costs, which will keep profitability in
check; and 4) increasing industry fragmentation across regions is likely to impact
pricing power.
„ Valuation: Grasim Industries (Grasim) remains our preferred pick
Our preferred pick in the sector is Grasim, which we like for its viscose staple fibre
(VSF) business. We also have a Buy rating on Jaiprakash Associates as we think
its valuations are attractive.