With cement prices moving up almost across the country, cement stocks have been fairly steady and remained firm in an otherwise dull market on Monday.
Cement manufacturers are believed to have hiked by as much as Rs 5-10 for a Rs 50 kg bag in the western and southern parts of the country in November. For instance, prices are understood to have been increased by Rs 10-15 per 50 kg bag in Andhra Pradesh in December while prices in the Mumbai region are up by about Rs 8-11 per bag. The increase in prices is contrary to the Street’s expectations, which has been pencilling in a weak pricing scenario for the sector because of the fresh supply into the market.
In fact, industry watchers have been pointing out for quite some time now that the supply of cement would outstrip demand resulting in a softening of prices across the country. An estimated 75 million tonne of capacity is expected to come on stream during 2009-10 and 2010-11 on the back of about 29 million tonne having been added last year. As a result, prices were expected to come off by about 7-8% in 2010-11 and industry watchers say they should bottom out only sometime in the middle of 2011-12.
Meanwhile, demand is expected to grow at around 9% this year and at a slightly higher rate next year driven by the infrastructure sector and in line with the compounded annual growth between 2004-2009 of 9.3%. Cement makers have done well in the last two quarters with raw material costs coming down and demand remaining steady both at home and in the export market. With the monsoons over, demand should pick up, say industry watchers.The total market capitalisation of 50 major cement and products companies has increased by 3.1% on Monday to Rs 73,650 crore from Rs 71,428 crore last Friday.
Among the most actively traded cement stocks, ACC’s price rose by 5% to Rs 858.25 on Monday. The net profit of the company increased by 54.06% to Rs 436 crore during July-September?09 from Rs 283 crore in the corresponding period of the during July-September ?08. The sales of the company also increased by 8.25% during the above period.
Similarly Mangalam Cement has been gaining steadily in the stock market. Its price increased by 9% to Rs 137.65 on 14th December ?09 from Rs 126.30 on December 11, ?09. The M-Cap of Mangalam Cement increased by Rs 30.30 crore during the above period. This can be explained from its second quarter profit performance. The net profit of the company increased by 59.1% to Rs 35 crore during July-September ?09 from the level of Rs 22 crore during July-September ?08.