Revenues rose during the quarter on the back of higher volumes and better realisations.
Shree Cement had a good December 2007 quarter. The company’s revenues increased by 43.3 per cent y-o-y to Rs 523.6 crore on the back of higher volumes and better realisations.
Its operating profit rose by nearly 40 per cent, which is commendable as there has been cost pressure on the freight and power front. The operating margin declined 100 basis points y-o-y to 42.7 per cent.
The sales increased by 23 per cent y-o-y to 1.6 million tonne during the quarter, while net realisations improved by over 20 per cent y-o-y to Rs 3,200 a tonne.
While the raw material cost rose by a mere 14 per cent, the freight, power and fuel, staff cost and other expenditure went up between 40 and 77 per cent on a y-o-y basis. But, on a sequential basis, power and fuel costs increased by merely one per cent.
However, the company’s net profit dipped 66 per cent y-o-y. The depreciation costs went up by 613 per cent due to the commissioning of new grinding capacity worth 1.5 million tonne a year.
While the cement demand grew at the rate of 10.3 per cent across the country in the first eight months of FY08, demand in the north, where Shree Cement operates, grew at 11.2 per cent. A lot of new capacity is being added in the cement sector by FY09 and this will lead to a surplus capacity in some regions.
However, analysts are of the view that some of the projects are likely to get delayed. Shree Cement will increase its capacity by another 1.5 tonne in the next two quarters.
Shree Cement is one of the more efficient players in the industry. Analysts believe that it will continue to grow at twice the industry growth rate, in FY09. At the current market price of 1332, the company shares trade at around 12 times estimated FY08 earnings and 10 times FY09 earnings.
Understanding Short Term Trading
Before I begin, this blog is not for intraday traders. My definition of short term implies duration of around 2 to 3 months.
Short Term stock picking is no rocket science, but rather a visual interpretation of technical charts. A basic moving average on a time frame chart will show the direction of the securities movement.
Moving averages is a mathematical results calculated by averaging a number of past data points. Moving averages (MA) in it's basic form is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. Once the value of MA has been calculated, they are plotted onto a chart and then connected to create a moving average line. Typical moving averages used for short term trading are 50 MA and 100 MA.
Types of Moving Averages
1) Simple Moving Average (SMA)
SMA is calculated by taking the arithmetic mean of a given set of values on a rolling window of timeframe. The usefulness of the SMA is limited because each point in the data series is weighted the same, regardless of where it occurs in the sequence. Critics argue that the most recent data is more significant than the older data and should have a greater influence on the final result.
2) Exponential Moving Average (EMA)
EMA overcomes the limits of SMA, where more weight is given to the recent prices in an attempt to make it more responsive to new information. When calculating the first point of the EMA, we may notice that there is no value available to use as the previous EMA. This small problem can be solved by starting the calculation with a simple moving average and continuing on with calculating the EMA.
The primary functions of a moving average is to identify trends and reversals, measure the strength of an asset's momentum and determine potential areas where an asset will find support or resistance. Moving averages are lagging indicator, which means they do not predict new trend, but confirm trends once they have been established.
A stock is deemed to be in an uptrend when the price is above a moving average and the average is sloping upward. Conversely, a trader will use a price below a downward sloping average to confirm a downtrend. Many traders will only consider holding a long position in an asset when the price is trading above a moving average.
In general, short-term momentum can be gauged by looking at moving averages that focus on time periods of 50 days or less. Looking at moving averages that are created with a period of 50 to 100 days is generally regarded as a good measure of medium-term momentum. Finally, any moving average that uses 100 days or more in the calculation can be used as a measure of long-term momentum.
Support, resistence and stoploss can be infered by referring the closet MA below or above the market price. The other factor that is used in short term momentum is the trading volume. The moving averages along with the trading volume can provide a better insight to short term movement.
Markets are moved by their largest participants - I believe this is the single most important principle in short-term trading. Accordingly, I track the presence of large traders by determining how much volume is in the market and how that compares to average. Because volume correlates very highly with volatility, the market's relative volume helps you determine the amount of movement likely at any given time frame--and it helps you handicap the odds of trending vs. remaining slow and range bound.
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