Table of Contents
Revising estimates upwards driven by higher pricing, lower
costs..........................................................................................3
Top picks- Remain OW on Grasim and Ultratech on
valuations..................................................................................5
Demand momentum unlikely to sustain, but 5-6% growth
achievable in FY10E.................................................................7
Which states/regions are driving cement demand........................................................9
Demand outlook for FY10-11E across regions, South India growth to moderate .....10
Supply discipline more important that capacity additions .10
We remain confident of disciplined supply in major regions ....................................11
Costs reduction across fuel, freight .....................................12
While INR has depreciated, sharp decline in import coal prices ...............................12
However longer term coal still remains a challenge for industry...............................13
Cement prices- Supply discipline key to pricing.................14
Recent increases sharply higher than our estimates ...................................................14
Price cuts likely to start in H2FY10E…. ...................................................................16
….however remain convinced of greater ' supply discipline'.....................................16
Industry leverage remains low ...................................................................................17
Stronger earnings outlook means M&A likely to be delayed
.................................................................................................17
Stock price corrections should be buying opportunities ...18
Companies
ACC Limited..............................................................................................................22
Ambuja Cements Limited ..........................................................................................30
Grasim Industries Ltd ................................................................................................38
UltraTech Cement Ltd ...............................................................................................47
The author acknowledges the contribution of Neha Manpuria of J.P. Morgan
Services India Ltd., Mumbai, to this report