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It's the end of earnings downgrades for cement
After a few subdued quarters, cement prices have shown an uptick. Prices rose to Rs 280 per 50-kg bag, from Rs 210-220 a bag in December 2015-January 2016.

In West, too, prices are up Rs 20-40 per bag, with prices in Maharashtra and Gujarat having touched Rs 290 and Rs 270 a bag levels. Prices in South India had already gained 8.5 per cent over a year in the December quarter. On the demand side, analysts expect more recovery after Holi. The months up till June are considered best in terms of demand, as thereafter monsoon sets in, thereby subduing construction activity.

Experts are now banking on further recovery in infrastructure after the Budget’s infrastructure push. However, this might take some time, given the process involved in fund allocation and project awarding. So, post monsoon season is the time when analysts foresee a good uptick in demand.

Slower capacity addition will also help. India Ratings expects producers to add 40 million tonnes per annum (mtpa) capacity over FY15-FY17, a CAGR of 4.9 per cent, lower than 5.8 per cent growth seen during FY13-FY15 (additional 42 mtpa).

What’s more, higher volumes, better prices and benign costs (fuel and transportation) should improve Ebitda per tonne of cement players, arresting the earnings downgrades for large-caps, ACC and Ambuja Cements trade at relatively inexpensivevaluations (10-10.5 times the CY16 Ebitda) and consensus estimates need upgrades to account for pricing and efficiency improvements.

In North-Central bets, as JK Lakshmi Cement, JK Cement and Prism Cement, while UltraTech remains their preferred pick.