Cement shares may rebound near-term; long-term outlook cautious

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Cement shares may rebound near-term; long-term outlook cautious

This article was posted on Feb 21, 2009 and is filed under Stock Views

MUMBAI: Shares of cement manufacturers may rebound in the near-term, led by a pick-up in sales over the next couple of months on account of arise in construction activity just after winter. But, market watchers feel investors should use any such rebound to book profits as the longer-term outlook for the sector still appears hazy because of a slowdown in the economy.

“The long-term outlook should remain difficult, given the deteriorating macro outlook and expectation of softening GDP,” HSBC Global Research said in a report.

The stronger-than-expected cement sales figures in January have brought some optimism for the sector, but analysts advice caution.

Motilal Oswal Securities, in its sector report, said, “We believe cement prices would come under pressure from 2QFY10 onwards as full impact of new capacity added is felt.”

The brokerage added, “Valuations for the industry have corrected sharply and are attractive. Asset valuations for all the companies are below replacement cost of US$120/ton. However, upside seems limited from current levels, especially with impending excess supply situation and pressure on margins.”

source: Economictimes

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