Madras Cements sees challenging outlook, India

Madras Cements sees challenging outlook, India
Published: 15 June 2011

Madras Cement’s (MCL) management has recently said that demand in the south continues to decline, and the near-term outlook for the industry is challenging.

IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, recommends strong ’Sell’ on Madras Cement (MCL).

"In our recent meeting, Madras Cements’s (MCL) management said demand in the south continues to decline, and the near-term outlook for the industry is challenging," IIFL says.

The report stated that MCL said the recent price hikes are primarily to pass on sharp cost increases. MCL’s capacity will increase to 12Mta in 2QFY12 and no further capacity expansions are planned, given poor industry fundamentals.

"We retain SELL on the stock, as we see no positive triggers in the medium term. On the other hand, downside is limited, in our view, with the stock trading at EV/ton of US$70 on FY13 estimates (replacement cost currently is US$120/t)," the report added.