Cement stocks spurt 13% since July 25

Our Markets Bureau

New Delhi, Aug 8: Cement stocks have been riding high on encouraging quarterly results and expectation of further increase in prices. Companies like Larsen & Toubro, ACC, India Cements and Kesoram Industries have seen a spurt up to 13 per cent in their stock prices since July 25.

However, it remains to be seen whether the rally in these counters would gain further ground as their toplines have been hit in July due to the monsoons.

The latest figures from the Cement Manufacturers Association (CMA) show that the sales have dropped 5.24 per cent in July 2001 over the same period last year. Production has also dropped by 5.2 per cent to 7.46 million tonne during the last month.

A Delhi-based broker said, “The bigger companies like Grasim and Gujarat Ambuja have not been able to sustain the rally even after a sharp spurt in top and bottomlines in the quarter ended June 2001. Besides, lower sales in July would have its adverse effect on the next quarter results.”

However, another Delhi-based broker held a different view: “I see good prospects for cement stocks which have shown brilliant financial results and after a good monsoon the demand may pick up again. Besides, due to cartelisation, these companies are in a position to jack up the prices.” The cement companies have recently increased the prices by Rs 5 per 50 kg bag.

India Cement was the top gainer from the sector with the scrip spurting 12.9 per cent between July 25 and August 6 and 30 per cent since June 28 to close at Rs 38.95 on August 7. The company had reported a 30 per cent spurt in net profits to Rs 31.77 crore.
However, sales of the company have come down to Rs 358.42 crore in the quarter ended June 2001 as against Rs 390.74 crore in the same period last year.

The BK Birla groups’ Kesoram Industries has also gained 9.63 per cent since July 25 to close at Rs 23.9 on August 7. The scrip has been trailing close to the Rs 20-mark after it flared up on rumours of a Dubai-based investor buying into the scrip.

Larson & Toubro also flared up 4.35 per cent during the period to close at Rs 215.9 on August 7. The company has plans to selloff its cement units for which leading companies like France-based Lafarge, Cemex of Mexico and Swiss-major Holcim are already in queue. The company had shown an impressive 242 per cent spurt in net profits and 10 per cent increase in sales during the quarter ended June 2001, over the same period last year.