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http://www.kotaksecurities.com/pdf/dmb/MorningInsight15032012.pdf
CEMENT SECTOR UPDATE
PRICES CONTINUE TO STAY FIRM AND HIKED BY Rs 10-25 PER
BAG ACROSS REGIONS
q After witnessing declines in cement prices during December to first week
of January, cement prices have been continuously firming up and have
now been hiked by Rs 10-25 per bag post hike in railway freight rates
last week
q Demand growth has started reviving and is expected to be strong during
FY13.
q Since we have now begin to see demand growth revival, we would recommend a selective approach to cement sector and would prefer players
having attractive valuations and higher capacities since delta effect of
higher cement prices will be much more with these players.
Demand supply scenario
Cement demand had remained slow till Oct, 2011 and started reviving since Nov,
2011 due to demand coming from individual housing units as well as infrastructure.
Cement demand growth since Nov, 2011 has grown in double digits on a monthly
basis and demand growth for Apr, 11 - Feb, 12 period now stands at 6.9%. Our
interaction with companies and dealers indicate that this demand growth is likely to
be sustained in near future. We also expect revival in infrastructure award process
during FY13 which would also result in keeping cement demand growth strong.
Cement demand has a correlation with GDP growth and has grown at 1.2-1.3x GDP
growth since 2005. But it has defied that correlation during FY11 and FY12 till date
due to lack of infrastructure activity as well as slowdown in real estate due to higher
interest rates. GDP growth is expected to be around 7.5% going forward, we thus
expect cement demand to improve by 9.5-10% going forward. Focus on infrastructure creation as well as pre-election spend during FY13 and FY14 would be key drivers for the cement demand growth going forward.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
http://www.kotaksecurities.com/pdf/dmb/MorningInsight15032012.pdf
CEMENT SECTOR UPDATE
PRICES CONTINUE TO STAY FIRM AND HIKED BY Rs 10-25 PER
BAG ACROSS REGIONS
q After witnessing declines in cement prices during December to first week
of January, cement prices have been continuously firming up and have
now been hiked by Rs 10-25 per bag post hike in railway freight rates
last week
q Demand growth has started reviving and is expected to be strong during
FY13.
q Since we have now begin to see demand growth revival, we would recommend a selective approach to cement sector and would prefer players
having attractive valuations and higher capacities since delta effect of
higher cement prices will be much more with these players.
Demand supply scenario
Cement demand had remained slow till Oct, 2011 and started reviving since Nov,
2011 due to demand coming from individual housing units as well as infrastructure.
Cement demand growth since Nov, 2011 has grown in double digits on a monthly
basis and demand growth for Apr, 11 - Feb, 12 period now stands at 6.9%. Our
interaction with companies and dealers indicate that this demand growth is likely to
be sustained in near future. We also expect revival in infrastructure award process
during FY13 which would also result in keeping cement demand growth strong.
Cement demand has a correlation with GDP growth and has grown at 1.2-1.3x GDP
growth since 2005. But it has defied that correlation during FY11 and FY12 till date
due to lack of infrastructure activity as well as slowdown in real estate due to higher
interest rates. GDP growth is expected to be around 7.5% going forward, we thus
expect cement demand to improve by 9.5-10% going forward. Focus on infrastructure creation as well as pre-election spend during FY13 and FY14 would be key drivers for the cement demand growth going forward.
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