Citigroup - Cement Sector

Another Adverse Policy Measure

This move will have an adverse impact on sentiment on the cement industry, which has already been affected by the cut in import duty from 12.5% to nil in January 2007, and an increase in the excise duty in the budget. While there is hardly any impact on near-term cement profitability due to the positive demand supply dynamics of the industry, we believe the repeated actions by the government are attempts to take away the last leg of pricing upside before the next large batch of cement capacities comes in.

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