Friday, March 13, 2009

Trend Call: BUY Acc Ltd Cmp 551 SL 523 Target= 568 / 584

Strong volume growth. In Feb ’09, all-India cement production and dispatch rose 8.6% and 8.7% yoy, respectively. Strong volumes in the North and East were pulled down by a slump in the Central and West. Due to upcoming elections, infrastructure-led Government spending propped up demand in Feb ’09.

Utilization levels are stable. All-India capacity utilisation was 92% (95% a year earlier and 93% in the previous month). At 88%, the South recorded the lowest utilisation rate; at 97%, the Central region the highest. Capacity during the month increased by 0.55m tons (in the western region) to 207.8m tons.

Top five disappoint. Combined volumes of the top five companies for Feb ’09 rose 6.7% yoy. ACC’s volume growth was bleak (3.6% yoy) and India Cements’ plunged (-7.8% yoy). Aggregate YTD dispatch growth of the top five has been just 4.1% yoy. Of the outperformers in yoy volume growth, were the North-based Shree and JK Cements; others were OCL, Orient and Kesoram.
Price and demand outlook positive for the short term. Prices have increased by Rs3-7 a bag across India except in some parts of the South. Demand in Feb-Mar has picked up, mainly in government projects. Dealers attribute this to a smart rise in government spending due to the impending elections, fiscal year end and peak period of construction. They expect demand to decelerate after Mar ’09. Nevertheless, the real estate sector continues its poor performance.


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