Prabhudas Lilladher maintains overweight on cement sector

MUMBAI: Prabhudas Lilladher has maintained its overweight stance on the cement sector citing that heavy rains have dragged demand temporarily but that the outlook remains strong. It said it continues to like ACC for its improving quality of operations, JK Lakshmi Cement and Heidelberg Cement India on the back of attractive valuations and strong earnings outlook.

The brokerage said that weak demand across India is on account of heavy rains with fall in the range of 6-7% YoY. It said that while strong monsoon across all regions were a dampener in July, it is expected to result in a better demand environment in H2FY2017, as two back-to-back droughts had led to slump in rural demand and fall in construction activity.

Prabhudas Lilladher said that despite the lacklustre demand, prices continue to remain strong across most regions backed by strong discipline among players. It said that strong monsoon would boost demand Q3FY2017 onwards with pick-up in activity across the segments of economy. It said this aided by the government's strong focus on spending in infra and housing sector would elevate the demand trajectory.

ACC rose 3.52% to Rs. 1720.70 while JK Lakshmi Cement rose 1.49% to Rs. 427.75 and Heidelberg Cement India surged 4.96% to Rs. 127.95 on Friday.