Madras Cements In The Limelight

Despite a disappointing corpo-rate performance, the Madras

Cements scrip figured among the major gainers of the week at the

bourses last week.

On the BSE, the scrip ended the week at Rs 7,700, a gain of Rs

617.25 over the previous weeles closing price of Rs 7,082.75. At

the NSE, the scrip gained Rs 665.35 over previous Friday'sclose.

Madras Cements showed a decline of nearly 17 per cent in its net

profit for the second half of fiscal 1997.

In spite of this, the market is quite upbeat about the prospects

of the scrip. Said a deal er at a leading corporate broking

 

house: "Most of the stock is held by institutions which is an

indicator of the sound fundamentals of the company.

The company has been fund- ing most of its growth through

internal accruals. Also, with the commissioning of the company's

new plant at Alaffiiytw with a capacity of 0.9 million tonnes per

annum, there will be a significant jump in sales which will be

reflected in the company's bottomline."

Analysts feel that the company should do well in the coming days

despite a bleak outlook for the cement sector in the fwst half of

the current fiscal. This, according to them. is due to the fact

that the company is situated in the south- ern part ofthe

countrywhere realisations are the highest and freight costs the

lowest

Says Prasanna Marar, research analyst at Mafatlal Securities:

"Mere is expected to be a surplus supply of cement in

the north, west and the east zones of India. However,

the southern markets are expected to face a deficit in fis- cal

1998 as was the case in the previous fiscal.

" Despite a fall in cement prices in most of the reigions. the

company's rela- tive proximity to the ports gives it the option

to export in the scenario of reducing domestic realisations."

With a market share of 15 per cent and 11 per cent in Tan-dl Nadu

and Kerala respectively, Madras Cements ranks third in the

southern markets. The company expects to set up capacity of 5

million tonnes per annum by fiscal 2002 by continuing to focus on

its core competency. It also plans to set up a 0.05 million

tonnes per annum grinding unit in Sri Lanka ata cost of about Rs

400 million.