>Cement Sector (INVESTSMART)

February: Strong despatches and firm price scenario continues…

During February 2009, cement despatches and consumption showed YoY growth of 9.2% and 8.2% respectively, primarily led by eastern, central and northern regions of the country. On MoM basis, cement despatches and consumption were marginally down at 0.3% and 0.2% respectively.

Strong growth along with increased construction activity resulted in cement prices rising by Rs 4-5 per bag across all regions with central region witnessing an increase of over Rs 15 per bag during February. Going forward, we expect cement prices to remain firm across regions in near term as government backed infra projects combined with inception of construction season will keep the demand strong.

Though cement industry showed improved performance during last three months, sustainability of such performance over medium term is a big question mark especially in a scenario when the key end user industries like real estate and infrastructure are facing difficult times. We believe,
in near term there might be some demand push by the existing government projects but the profitability of the industry will come under pressure in short to medium term once fresh capacities comes on stream.

To see full report: CEMENT SECTOR