Cement Sector Monthly Update
Jan dispatches up 8.8% continue to surprise
Key Points
n January 2009 cement dispatches continued the momentum picked up over last two months and grew at a pace of 8.8% yoy to 16.13mn tonnes. The growth was on account of strong pick up in rural housing and also pick up in infrastructure projects. The low base for January 2008 also helped the growth. Month on month cement dispatches grew by 0.7%.
n Dispatches growth of cement majors (ACC, Ambuja, Grasim & Ultratech) at 7.4% yoy was lower than that of industry average for the month of January 09. ACC with 12.5% yoy growth in dispatches topped the growth chart while Ultratech at 4.3% was at the bottom of the chart.
n All India cement prices for the month of January declined by 0.33% yoy and 0.42% m-o-m to Rs231 per bag. However according to cement dealers during the month of February most of the cement have increased cement prices by Rs3-5/bag.
n International coal prices witnessed a substantial decline of 13.7% on a yoy basis to USD96.2 per ton. However on a m-o-m basis, coal prices witnessed an increase of 4.6%.
n Cement stocks on an aggregate basis over last three months have outperformed Sensex by 37%. We acknowledge that the outlook on macros for cement sector has not improved as compared to previous months. However we opine that business fundamentals, driven by sharp drop in coal, pet coke and HDPE prices have improved considerably. We believe the impending oversupply of cement on back of capacity addition and the resultant weakening of pricing power of cement producers is already factored in valuation of cement stocks. But what is not factored in is the possible upgrade in FY2010 earnings given sharp moderations in cost. We maintain positive view on ACC, Ambuja, India Cement & Ultratech.
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