GOLDEN RULES FOR TRADING

Cement Stocks Outlook for the week – 01 to 05.02.2016 Down next week on low cement demand; results eyed

Cement Stocks Outlook for the week – 01 to 05.02.2016
Down next week on low cement demand; results eyed

Stocks of cement manufacturing companies are seen falling in the week ahead as
demand for the building material remains persistently weak across large parts of the
country, even as the market will look out for Oct-Dec earnings of cement companies.
Grasim Industries is expected to declare its Oct-Dec earnings on Saturday, while
ACC, Ambuja Cements will declare their earnings for the quarter on Feb 10. Grasim
Industries' standalone net profit for Oct-Dec is seen down 46% quarter on quarter at
1.83 bln rupees. The company's standalone net sales are seen up a mere 1% at 18.35
bln rupees. Operating margin, however, is expected to be higher at 14%.

Cement companies' top lines are expected to remain weak in Oct-Dec, along with
their operating margins, because of the repeated price cuts they have had to undertake,
to try to boost demand in a slow market. Despite the slowdown in the sector as a
whole, analysts prefer certain companies such as UltraTech Cement. UltraTech's Oct-
Dec earnings were also above market estimates. While the recent spell of subnormal
monsoons has hurt rural demand, it is seen getting offset by a pick-up in government
infrastructure spends and election led demand in few states. UltraTech would benefit
from its expanded capacity and a more extensive presence across the country. The
stock has corrected from its recent peak and largely factors in a subdued demand
scenario.