Cement: Pricing action historically peaks in March quarter; :: Kotak Securities PDF link

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Cement: Pricing action historically peaks in March quarter; cost eating into
benefits again
` Return ratios at five-year lows despite pricing discipline
` Cost-pressures unlikely to abate in near term - freight and fuel costs already
signaling cost-push
` Pricing discipline continues to remain precariously positioned, traditionally
maximized by March
` Valuation multiples indicating very optimistic scenario, still leave no room
for upsides
http://www.kotaksecurities.com/pdf/indiadaily/indiadaily20032012.pdf



Pricing action historically peaks in March quarter; cost eating into benefits again.
Pricing action for cement companies historically peaks in the March quarter (+Rs10-15
in 1QCY12), and like in the past three years, the benefits of the same will be eaten into
by higher cost incidence. In CY2011, for instance, a Rs300-330/ton improvement in
pricing was eaten by +Rs350/ton in operating costs. Despite building a more benign
profitability in CY2012E (+Rs190/ton), ACC and ACEM trade at 10X and 9X EV/EBITDA
respectively, leaving no room for upsides. Maintain SELL rating with target prices of
Rs1,060/share for ACC and Rs150/share for ACEM.