The stock ended the week on Friday at Rs 1,002.75 on the BSE and Rs 1,008.60 on the NSE. The market is bearish on the counter and the poor half-yearly performance of the company has not come as a surprise to many.
Says a dealer at Indsec Broking: "The market has reacted to the poor results shown by the company in the first half of the current financial year. The stock is expected to decline further in the short-term and will probably hover around Rs 850-Rs 875."
A section of brokers have also expressed surprise at the poor performance of cement companies in the market. According to brokers, the past five months have seen an oversupply in the cement sector as a result of which prices are
under pressure.
Added the dealer: "The emphasis given by the government on the infrastructure and the activity that has been witnessed in the sector should ideally be a boon to cement manufacturers. However, these companies are passing through a bad patch."
The latest research report on the Indian cement sector released by First Global Finance indicates that ACC has not succeeded in improving upon its weakness of being a high cost producer of cement.
The company proposes to go ahead with Telco and Bridgestone Corporation, Japan for producing steel radial tyres. It intends to invest in a Rs 3.6 billion project to manufacture automotive catalytic converters in association with major two-stroke manufacturers like Bajaj Auto, TVS Suzuki and Hero Motors. The report indicates that such diversifications may affect the interest of shareholders.
As compared to power and fuel costs of about Rs 500 per tonne of production for Gujarat Ambuja and Madras Cement, this is more than Rs 530 for ACC. This is in spite of the fact that ACC gets its power and coal at prices lower than other cement majors. The company has recently modernised its Kymore facility in the current financial year and also commissioned a 1.2 million clinkering unit and increased the cement grinding capacity from 0.7 million tpa to 1.4 million tpa.
