Sell UltraTech Cement, target of Rs 526: IIFL
IIFL has downgraded its rating on UltraTech Cement from add to sell with a target price of Rs 526 in its May 25, 2009 research report.
“We expect sharp erosion in cement realisation from 3QFY10 in the southern and western regions, due to: i) likely decline in capacity utilisation with new capacities coming in; and ii) waning pricing discipline, with four new players entering in the next six months. The western and southern regions accounted for 62% of UCL’s volume sales in FY09 and the proportion is likely to increase further in FY10 and FY11 as volume increases will come primarily from expansion in Andhra Pradesh. We believe that efficiency gains from expansion of captive power plants will not offset the realisation losses.”
“In our view, the stock’s P/BV of 1.7x FY11ii does not price in the challenges in UCL’s key markets going forward. (In contrast, the stock was trading at a P/BV of 0.8x when we had upgraded our recommendation to ADD in December 2008). We downgrade UCL from ‘ADD’ to ‘SELL’ with a target of Rs 526,” says IIFL’s research report.
source: Moneycontrol
Tags: brokerage calls, cement sector, cement stocks, hot stocks, IIFL stock views, NSE Tips, short term stocks, ultratech cement
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