Cement - February 2011 Mixed Bag - Motilal Oswal

CEMENT: Feb-11 mixed bag; aggregate volumes of top-2 groups in-line; price increase to pass excise, coal cost push

For Jan-11, cement Industry volumes grew by 1.7% YoY to 18.5mt and FY11YTD (till Jan) volume growth was 4.2% to 170mt.

ACC reported 17% YoY growth (2.4% MoM decline) in volumes to 2mt (v/s est 1.85mt), benefiting from the new capacities.

Ambuja reported 5% YoY growth (~4% MoM decline) to 1.77mt (v/s est 1.83mt).

A.V.Birla group reported 4.4% YoY growth (flat MoM) to 3.33mt (excl clinker) (v/s est 3.45mt). We are awaiting their clinker volumes.

JaiPrakash reported 32% YoY growth (~10% MoM) to 1.52mt (v/s est 1.7mt).

Cement prices have been increased in some parts during the week by ~Rs5-6/bag and is expected to rise in other regions to pass-on impact of increase in excise and cost-push on account of coal price increase of ~30% by Coal India. This price increase is on back of ~Rs10-40/bag increase in cement prices since Jan-11.

We have already witnessed bottom-of-the-cycle utilization, and it should gradually improve from hereon driven by presence of sustainable demand drivers. Prefer Ambuja Cement & ACC in large-caps, and Birla Corp & India Cement in mid-caps.

Source : Equity Bulls

Keywords