Export synergies

The stock price of UltraTech CemCo, the de-merged company from L&T, has been on rise in the last few days on huge growth potential from export market and also its synergies with Grasim, which has controlling stake in it. In the last three days, the stock price has gained 19 per cent. Rise in the stock price is accompanied with an increase in trading volumes. In today’s trading, the stock price gained 7.11 per cent at Rs 316.25 on the BSE with sizeable volumes traded.  Analysts said that with the transfer of management control to Grasim, a sharp improvement in its operating efficiencies and profitability is likely to be seen.

According to foreign broking firm CLSA, "UltraTech CemCo will register the highest earnings growth among CLSA universe of cement companies as rising realisations will be supported by cost improvements. We expect cost savings of nearly Rs 120 crore per year over the next 2-3 years as the company synergises its operations with those of Grasim."  Another reason for the rise is good export of cement and clinker.

"Clinker realisations on exports have moved up significantly over the last 12 months and the company currently exports clinker at $32 per tonne (f.o.b.) as compared to the average of $22 in 2004. The company is striving to shift from export of clinker to export cement. Difficult, but if achieved will be an added positive," CLSA said.

Brokers said there is good possibility of Indian cement companies going for export of cement as there is large-scale construction activity being undertaken in West Asia especially in Dubai and around it.  "Indian cement companies including UltraTech Cemco are expected to benefit from the boom in construction activity in West Asia and there could be re-rating for most of the big cement companies due to it," said an analyst with a domestic broking firm.