Shobhana Subramanian / Mumbai Jun 05, 2009, 00:59 IST
Defying apprehensions that additional capacities and slowing demand will hurt sales, the six larger cement makers ---accounting for nearly half the current capacity of just over 200 million tonnes----turned in a growth in dispatches of a strong 16 per cent year-on-year in May.
The growth in April had been 13 per cent year-on-year. Of late though, industry watchers have been somewhat more optimistic and believe that demand could grow by as much as 7-9 per cent this year; dispatches for the industry in 2008-09 were up 8.3 per cent.
Not surprisingly, the BSRB cement index has gained 67 per cent since the start of the year compared with a rise of 52 per cent for the benchmark indices some stocks have rallied by more than 100 per cent.
However, industry watchers continue to believe that while the momentum will remain strong in the first half of the year, partly because of a low base effect, it could taper off after that. The supply of cement, they say, could outstrip demand resulting in lower utilisations andpricing pressure.
The feeling is that delays in commissioning new capacities have helped keep prices firm so far. However, the situation could change because by March 2010, an additional 35 million tonnes of supply is expected to come in. That’s one reason analysts feel that valuations for cement stocks aren’t so attractive any longer.
At the current price of Rs 777, Ultratech, for instance, trades at a price-earnings multiple of 10 times estimated 2009-10 earnings. At Rs 836, ACC trades at nearly 15 times 2009 estimated earnings while at Rs 100, Ambuja Cements trades at about 13.5 times estimated 2009 earnings.
i am surprised hearing that the growth we are seeing is due to low base effect in first half of last year, i was of the opinion that the worst arrived only after July 08. the numbers were bed for all other industry after this month. if at all the H2 08 is not having low base than we may say that the industry has out performed already in tough times. and it continued doing so. about the capacity additions ahead its simple maths, 200 MT capacity, 10 % growth accounts for 20 MT + why we forgot to add low base effect here. we have seen huge surge in capacity utilization numbers. also its highly region specific, that needs to account for. with stable government at ceneter and focus on infra developement, i dont see any tough times ahead for cement manufacturers. see the prvailling pricing pattern that shows industry strength.
Content Guide
The growth in April had been 13 per cent year-on-year. Of late though, industry watchers have been somewhat more optimistic and believe that demand could grow by as much as 7-9 per cent this year; dispatches for the industry in 2008-09 were up 8.3 per cent.
