Emkay positive on ACC, Ambuja, Ultratech & India Cement

Emkay Global Financial Services maintains its positive view on ACC, Ambuja, Ultratech and India Cement. With monsoon just around the corner and new cement capacities expected to bunch up in H2FY2010, investors have been rather vary of trend in cement price this monsoon. Cement dispatches usually decline during the monsoon season (July – September period) on account of slowdown in construction activity.

Emkay Global Financial Services’ report

With monsoon just around the corner and new cement capacities expected to
bunch up in H2FY2010 investors have been rather vary of trend in cement price this monsoon. Cement dispatches usually decline during the monsoon season (July – September period) on account of slowdown in construction activity. This USUALLY results in softening of cement prices during the monsoon season. Following these concerns large cap cement stocks have underperformed broader markets by 2-12%. The underperformance has come even when most of cement companies have seen earnings upgrade following better than expected earnings performance in the January-March 2009 quarter.

We acknowledge that the outlook on macros for cement sector has not improved as a possible FY2010 cement surplus scenario is likely to weaken the recent pricing power of the sector. However we opine after the recent jump in cement prices coupled with sharp drop in coal, pet coke and HDPE prices, earnings of cement companies are likely to show a lot of resilience. Currently Emkay cement universe is trading at 6.7X its FY2010E and USD 63 for FY2010 capacity. We believe even after the recent run in cement stocks valuation are reasonably attractive considering further possibilities of earnings upgrade. We maintain positive view on ACC, Ambuja, Ultratech and India Cement.

source: Moneycontrol

Tags: acc, Ambuja, buy rating, cement sector, Emkay Global, India Cement, positive, Ultratech

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