Slowdown in demand now a bigger
concern than expected oversupply
􀀗 Pressure on sale price should take away
gains from coal cost cuts; margins
should stay stressed on potential
oversupply and decline in prices in 2009
􀀗 Downgrade ACC, India Cements,
Madras Cements to Underweight (V)
from Neutral (V); Ambuja to
Underweight from Neutral
Demand slowdown a cause for concern. All-India cement
demand is moderating; in the first six months of FY09, it
was up 8% – lower than annualised growth of 10% over the
last three years. Although y-t-d demand growth for South
India looks healthy at 12%, it is below the 16% CAGR over
the last three years. Barring Andhra Pradesh, which was up
24% y-t-d, demand growth slowed in all southern states.
Pressure on sale price to take away benefits of coal price
decline; stress on margins to continue. Richard Bay Coal
prices, at cUSD100 per tonne, declined c44% in the last 2-3
months from the peak in June 2008, but pressure on prices
should offset benefits of this. We expect margin pressure to
continue, as likely oversupply in 2009 should bring sale
prices down.
Change in estimates. We revise our forecasts for Grasim,
Ultratech Cement and Madras Cements to factor in a higher
decline in sale price than our earlier estimates.
Ratings changes. We downgrade ACC, India Cements and
Madras Cements to Underweight (V) from Neutral (V),
Ambuja from Neutral to Underweight; and remain Neutral on
Grasim and Neutral (V) on Ultratech and Overweight (V) on
Shree Cements. We also change target prices for all stocks,
barring Shree Cements.

目录

Industry overview 4
Company sections 11
ACC 12
Ambuja Cements 16
Ultratech Cement 20
Shree Cements 24
Madras Cements 28
India Cements 33
Grasim Industries 38
Appendix: Industry data 43
North India 45
Disappointing demand growth
South India 46
Demand growth mainly led by Andhra Pradesh
West India 47
Moderate demand growth, led by Maharashtra
East India 48
Demand growth picked up after poor performance in FY08
Central India 49
Weak demand growth due to poor demand in UP

Industry overview
􀀗 Slowdown in demand is now a bigger concern than expected
oversupply; South India demand growth at 12% y-t-d also lower
than 16% CAGR over the last three years
􀀗 Pressure on sale price should offset gains from coal price cuts;
margins should stay stressed on potential oversupply and price
decline in 2009
􀀗 Downgrade ACC, India Cements and Madras Cements to UW(V)
from N(V) and Ambuja from N to UW; remain N on Grasim and
N(V)on Ultratech and OW(V) on Shree Cements

Demand slowdown
A bigger concern than oversupply
􀀗 All-India cement demand has shown signs of
moderation; demand in the first six months of
FY09 has grown at a moderate 8% compared to
annualised growth of 10% over the last three
years. The worsening macro outlook and increase
in interest costs have slowed down housing and
construction, reducing demand for cement
􀀗 North India, which accounts for c20% of all-
India consumption continues to disappoint, with
poor y-t-d demand growth of 2%, pulling down
all-India growth significantly. We expect

demand to pick up on increased spending on
infrastructure with the approaching
Commonwealth Games. However, our demand
growth estimates have significant downside risk
due to poor y-t-d demand
Demand growth in West India has also been
moderate at 8% y-t-d compared to a CAGR of
10% for the last three years
Demand in East India picked up after poor
performance in FY08 and grew 9% y-t-d
Central India remains weak, at 5% y-t-d