Cement Cos Outshine Sensex In Aug As Price Realisation, Demand Improve

Mumbai, Aug 10 | Updated: Aug 11 2004, 05:50am hrs
In August 2004, cement companies have outperformed the benchmark 30-share BSE Sensex indices following improved price realisation in the cement industries coupled with strong demand in the domestic as well as export markets. And with monsoon reviving, demand from the rural housing segment (housing accounts for 70 per cent of the domestic cement demand) is expected to go up.

Between Aug 2 and 10, 2004, most of the cement companies in the sector have gained ground with Gujarat Ambuja Cements, Grasim Industries, ACC , India Cements and Madras Cements have gained in the range of 6 -10 per cent. Mid-cap and small-cap cement stocks also surged.

During the same period, the BSE Sensex surged marginally by 0.95 per to 5,252.05 from 5,202.53. Sharad Jain, research analyst, Cholamandalam Securities, said: Sustained demand and improvement in average price realisation for cement in the retail segment, has generated interest in cement companies. On a y-o-y basis, the cement prices are trading 14-15 per cent higher at around Rs 163-167 per 50 kg bag.

The improvement in price realisation has been due to the steady demand for cement as well as consolidation in the sector. Demand has been good in north, north-east, west and central India. Despite demand being poor in southern-India (which is the largest the consumer of cement), the prices have continued to remain firm in the region. For the month of July 04, the cement despatches for the overall sector rose by 10.2 per cent to 10.06 million tonne. Demand from the export market has also kept prices firm. In fact, the demand from middle-east countries are so massive that in the next 5 years, the demand from these markets are expected to grow by 10-12 per cent, while the growth in domestic market will be around 6 per cent, added Mr Jain. With construction activity on an upswing in rural and urban segment, analyst feel that the rise in coal and fuel prices will be passed on to the consumer.