GOLDEN RULES FOR TRADING

Cement Stocks Outlook for the week – 09 to 13.05.2016 Seen trading with negative bias on weak demand

Cement Stocks Outlook for the week – 09 to 13.05.2016
Seen trading with negative bias on weak demand

Stocks of cement manufacturing companies are seen trading with a negative bias next week given
the persistently weak demand for the building material in large parts of the country. Around a fourth
of the country, particularly north, west and central India, is facing water scarcity and drought, which
threatens agricultural output and rural incomes, in turn making prospects of cement demand bleak.
Cement companies have also not been able to hike product prices much, adversely affecting their
near term prospects of profitability.

Large parts of the country have seen cement companies cutting price to push sales and hold on to
market share. Some big cement companies' Jan-Mar earnings have also been below market
expectations, dampening investor sentiment in stocks in the category. However, We are upbeat on
the medium term outlook for shares of UltraTech Cement, among large cement companies, and JK
Lakshmi Cement among the mid-size cement makers. Analysts see capacity expansion by these
companies as benefiting them, in the event of an upswing in cement demand. These companies also
have good reach across the country and strong brands to fall back on, which is expected to work in
their favour.