Cement Makers Face Tough 2018, Says Kotak Securities
The brokerage house prefers Grasim Industries, JK Lakshmi and Dalmia Bharat, where valuations are more reasonable.
Indian cement makers may continue to face headwinds next year amid rising costs and weak demand environment, according to brokerage house Kotak Securities.
The Goods and Services Tax-led disruptions, coupled with subdued demand, weighed on cement prices since May of this year. Besides that, the recent ban of petcoke in Haryana, Uttar Pradesh and Rajasthan also added to the cement makers’ woes.
We expect the cement prices to further increase in the current quarter, due to which, both fuel and higher freight costs will have an impact.Kotak Securities Research Report
The all-India cement prices increased by Rs 4 per bag on a monthly basis in December 2017, led by the price increase in the North as the companies attempt to offset cost increase post pet-coke usage ban in three states, Kotak Securities said.
Prices in other regions remained mostly subdued. South and East prices were flat while West saw a marginal decline, it added. Companies were unable to entirely pass on the cost increases in a challenging demand environment. Kotak said the industry volumes declined by 2.7 percent in October compared to same period last year.
The brokerage house prefers Grasim Industries, JK Lakshmi and Dalmia Bharat where valuations are more reasonable.