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MOSL: CEMENT-Speed breakers ahead-Prefer stocks with good long-term earnings prospects

​Cement: Speed breakers ahead; Prefer stocks with good long-term earnings prospects

• May-17 saw price correction across majority of the markets from the highs of April due to demand weakness and the government’s intervention to curb sharp price increases.
  
• Price corrections have been the highest in the north, south and central markets due to demand weakness in the central and south markets led by non-availability of sand. The trend of price weakness in these markets has continued into June-17.
  
• Pricing in the eastern market has been largely stable, barring some correction in Chhattisgarh. The west market has been the only exception, where prices increased as late as the first week of May-17. Gujarat has seen price increase in month of June-17 as well.
  
• Additionally, June-16 was a very heavy month in terms of volumes on account of higher construction activity in the north and central markets due to delay in the onset of monsoon. Hence, a heavy base, along with demand uncertainty in June-17 due to GST implementation, is likely to keep demand muted on a YoY basis.
  
• We expect price correction, particularly in the north and central markets, in monsoon this year (unlike last year, when there was no price correction) due to weak demand conditions and ramp-up of JPA’s assets acquired by Ultratech in 1HFY18 in north and central markets.