India: despite tough times, cement stocks could fetch good returns

India: despite tough times, cement stocks could fetch good returns
Published: 21 October 2011

Cements stocks trading in Indian markets are likely to benefit on an anticipated demand in the second quarter of FY12. This is in line with a sizeable number of infrastructure projects planned by the government. Moreover, rural cement consumption is also expected to increase after a good monsoon.

Today’s news on express highway projects worth 16000 Crore (US$3.18bn)is also a booster for the sector.

Cement companies have faced a tough time in the last couple of quarters. Companies suffered high production costs and lower than expected demand. Cement dispatches in July-Sept 11 grew only by 6% YoY which comparatively was low as most of cement companies had gone for major capital expenditure.

It in highly speculated that companies are likely to raise the cement price post Diwali. However, the price hike is expected to be moderate enough to help companies keep their profitability.

Stocks like Shree Cement, ACC and Ambuja Cements are key beneficiaries of this growing demand and price hike and can generate returns in the range of 15 to 20% in a one year time frame.