Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Cement: Dull performance... - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jan 22, 2003

    Cement: Dull performance...

    The cement sector's performance so far can be summed up as unimpressive and things will remain unchanged at least in the current quarter as well. Hence, it goes without saying that FY03 will go down as another forgettable year in the history of the industry, as far as financial performance is concerned. The only saving grace seems to be the healthy volume growth that the industry is clocking as a result of government's thrust on road projects and continued demand from the housing segment.

    The reason for the current state of affairs is an open secret and the blame lays squarely on the players in the industry for frenzied addition of capacities in order to capitalize on the largesse doled out by state governments in form of tax breaks. The 'cartel', which was quite strong in FY00, resulting in peak level prices in most states, took no time in crumbling and we seem to have come a full circle in a very short span of time.

    Familiar story of falling prices and declining margins...
    Excess capacity resulting in adverse demand-supply situation and declining prices is what the industry has witnessed in FY03 so far. As a result, the financial performance of most cement companies for the first two quarters of FY03 (YoY) has been disappointing. And as numbers keep pouring till the end of next week, third quarter too is likely to have nothing to write home about. The story of declining margins is expected to continue for all cement companies in the third quarter and markets seem to have already discounted this fact. This is evident in lackluster performance of cement scrips for the past few weeks.

    Note: Data pertains to top pure cement companies

    Given the current price situation prevailing in the country, though the (QoQ) performance in the 4QFY03 will be a shade better, YoY numbers will continue to disappoint due to spike in cement prices during 4QFY02.

    The Indian stock markets have clearly given thumbs down to the sector with most cement scrips in the red for the past couple of quarters. There has been considerable erosion in market capitalisation of all major cement in the last 12 months as a result. We believe that in the coming weeks, major cement companies will continue to witness selling pressure due to yet another disappointing performance in the quarter.

    However, having said this, all is not lost for the sector, which fares better than most sectors in terms of volume growth, thereby making dismal price scenario a short-term phenomenon. The price scenario is expected to improve gradually in FY04 on the back of sustained demand growth and so will the margins of producers during the second half of the next year. Volume growth is expected to continue at around 8% in FY04 as well, narrowing the demand-supply gap to a fair extent. Hence, we believe the top cement scrips, which seem out of favour now will make a comeback in another 6-7 months. Till such time, the field is open to bargain hunters.



    Equitymaster requests your view! Post a comment on "Cement: Dull performance...". Click here!


    More Views on News

    UltraTech: Post-Acquisition Cement Capacity Augmented to 93 MTPA (Quarterly Results Update - Detailed)

    Aug 11, 2017

    UltraTech Cement completed the acquisition of cement plants of Jaiprakash Associates Limited (JAL) and Jaypee Cement Corporation Limited (JCCL) during the quarter ended June 2017.

    Ambuja Cement: Fall in Other Income Drag Bottomline Lower (Quarterly Results Update - Detailed)

    Aug 11, 2017

    While topline witnessed growth on the back of higher cement sale volumes, a 50.5% YoY fall in other income weighed on Ambuja's bottomline during the quarter ending June 2017.

    ACC: Cementing Growth through Capacity Expansion and Favorable Sectoral Developments (Quarterly Results Update - Detailed)

    Jul 20, 2017

    Expanded capacity helped ACC strengthen its market presence in eastern region during the quarter ended June 2017.

    UltraTech: One of the Weakest Quarters in Years (Quarterly Results Update - Detailed)

    May 18, 2017

    Cement demand was weak because of subdued housing demand, volatile cement prices, and rising fuel costs.

    Ambuja Cem: Net Profits zoom up 361% YoY During Jan-March Quarter (Quarterly Results Update - Detailed)

    May 8, 2017

    Stock price jumps up on Ambuja-ACC merger talks...

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms