Cement Stocks Outlook: Up next week; more price hikes eyed

Cement shares are seen sideways with positive bias next week as investors await more hikes in cement prices especially in south India. In the week gone by, cement companies hiked prices in Maharashtra and Gujarat by 3 rupees and 5 rupees, respectively, per 50 kg bag. Sanjay Ladiwala, president of Bombay Dealers and Stockists Association, expects the south to follow suit and hike prices by 3-5 rupees in the next two weeks.

 

Shares of cement manufacturers outpaced broad indices this week, with 2-14% rise, reacting to the news of price hikes. Most analysts believe that the price hikes are likely to sustain and import of the commodity is unlikely to ease the prices here. Cement from Pakistan is likely to enter Indian markets in October. With a deficit of 5 mln tn as per current demand in the domestic market, cement imports are unlikely to exert downward pressure on prices, analysts said, adding the hike in cement prices in Pakistan itself recently will subdue the pricing advantage.

 

Currently, cement prices in the south are in the range of 240-275 rupees per 50 kg, in the west around 250-260 rupees, in the east around 220-235 rupees, and in the north around 220 rupees.

 

STOCK VIEW

 

Impending expiry of September derivatives Thursday is likely to add to the volatility in cement stocks, as open interest in these stocks is significantly high, dealers said. Ambuja Cement is likely to remain in focus after today's block deals, which was an execution of Swiss cement major Holcim's stake buy in the company from promoters.

 

In a block deal today, 63.4 mln Ambuja Cements shares, representing 4.2% of total equity, changed hands between Ambuja Cements promoters and Holcim,
on Bombay Stock Exchange at 152 rupees a share. Holcim's open offer for 20% more stake in Ambuja Cements at 154 rupees per share will start Oct 18 and close Nov 6.

 

India Cements is looking strongest among cement shares and is likely to move towards 310-325-rupee band, said a technical analyst with an institutional brokerage adding that the stock is expected to find support at 275 rupees.

 

Grasim Industries, which closed at an all-time high, is likely to touch 3,600-3,650 rupees in the next two weeks, he said. He expects Grasim to find support at 14-day moving average of 3,425 rupees. He recommended holding ACC shares with a target of 1,200 rupees.

Following are this week's closing prices, in rupees, of key cement shares on the National Stock Exchange, compared with the previous week:

Company		Closing price	Closing price	Change%
		21-Sep	14-Sep
ACC		1133.4	1107.15	2.4
Grasim cements		3444.6	3227.65	6.7
Ambuja cements		146.5	144.5	1.4
India cements		288.55	275.45	4.8
Ultratech cements		1050.7	974.55	7.8
Sensex		16564.23	15603.8	6.1
Nifty		4837.55	4518	7.1