Given the strong urban and rural housing demand and from SEZs along with IT/ITeS, the demand for cement will remain buoyant for the next two years with an annual growth rate of 10%. This was stated by Emkay Share in its latest research.
Prices are likely to go up further during the November-March construction period, which will reflect in both the topline and bottomline of companies.
Even after considering issues such as acquisition of limestone reserves, imports and equipment supplies, a capacity of 70 million tonne is likely to go on stream by FY’ 2009 and 87 million tonne by FY’ 2010 as against the industry’s original projection of 110 million tonne, which will entail the additional supply in next two years.
Even though the supply grows at 11.8% over the next four years on an annual basis, the projected capacity addition of 44 million tonne by FY’ 2009 is a 19.5% increase. This is likely to unsettle the demand-supply equation and result in significant supply overhang during the second half of FY 2009 and beyond. “We expect that the intensity of softening cement prices would largely be felt in H2 FY 2009 and beyond,” the brokerage added.
According to Emkay Share, riding on the back of buoyant price along with a nearly 25% to 50% growth in volumes, the cement companies are expected to post a robust growth between 15% and 45% in topline and between 25% and 105% in bottomline in the second quarter. And the same is expected to be in the remaining quarters, the research added. While ACC and Grasim to top the chart of earnings growth among large cap companies, India Cements and Orient Paper to post stellar performances in the quarters to come, it added.
