Coal news and updates

Moneycontrol Bureau Cement companies have been at a slight disadvantage when it comes to executing orders from the government. The government asked for a bulk procurement discount, leading to lower margins for cement firms. Also, a year ago, government had set fixed prices for new road projects for three years. But a report from Credit-Suisse notes that in new contracts the base bids of cement firms are a lot closer to the market rate. An increase of 10 percent has been allowed in prices, it says. It adds that, "price escalation of 10 percent gives high protection." The report believes that the current price hike in retail is assumed to be 8-10 percent Compound Annual Growth Rate (CAGR)."  This means — that with the already low-cost of production because of the low power and fuel costs — cement companies will also benefit from better prices from the government. But the report also points out that margins however good will still be lower than retail orders as prices for government road projects will remain fixed for the next one year starting April 2016. The large cement firms have committed 3 percent of capacity to such government contracts. U ltraTech  — according to the report — has the highest bids compared to its large cap competitors in the new road projects. But the report says that more competitive bids are coming from Shree , JK Lakshmi , JSW, Lafarge, Century and smaller players in the South. Credit-Suisse in its report recommends UltraTech in large caps and JK Lakshmi in mid-caps. The report expects a double-digit growth in the sector. "We are positive on demand recovery, but neutral on large caps."

Source: Moneyconytol.com