Budget, SC order on mill land give further fillip to the counter

Veena Venugopal

Mumbai, March 9

Cement scrips have been big buzzers in the market with several stocks touching their 52-week highs in the last two trading sessions.

ACC, Mangalam Cement, India Cements, Shree Cements, UltraTech Cement have all seen new highs on Wednesday and Thursday.

These scrips have moved up by about five per cent on Thursday. ACC touched its 52-week high of Rs 752.50 today, before closing trade at Rs 749.40, up by 4.97 per cent. Mangalam Cement gained 5.48 per cent at its closing price of Rs 140.60. India Cements gained Rs 6.80 and closed at Rs 165.55, a gain of 4.28 per cent. Shree Cements also registered a 4.88 per cent gain.

The cement sector has seen strong buying interest since the announcement of the Union Budget 2006. With the Finance Minister focussing on infrastructure developments in the country, analysts have been predicting strong revenue growth for cement companies.

Further, the Supreme Court's order allowing real estate development in Mumbai mill lands has given a further fillip to cement counters.

Price hike soon

With the anticipation of strong demand growth, analysts are predicting that cement companies would announce price hikes shortly. "There will be a 4-6 per cent rise in cement prices. We anticipate a manifold growth in demand. There are large projects that would soon move from the drawing board to the implementation stage. Demand for cement would come from all areas, industrial infrastructure, residential projects, commercial centres and government projects," said an analyst.

Valuations of cement scrips are now being reworked with these new parameters factored in. While analysts are not predicting across the board upsides on cement scrips, selective buying in the sector, even at current rates, is advised. Cement stocks have appreciated considerably in the last month of trade. Mangalam Cement has moved up a whopping 55 per cent in the last month of trade. ACC, India Cements and Gujarat Ambuja have moved up by 25 per cent, 18 per cent and 11 per cent, respectively.

Market experts opine that while earlier predictions revolved around strong demand growth for cement companies based in South India, now a more national level growth is seen. "The price rise might still be announced first in South India, but soon the demand disparity will even out," said an analyst with a large broking house.

(This article was published in the Business Line print edition dated March 10, 2006)
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