Madras Cements has chalked a capex of Rs15.24bn by the end of this year to expand its cement capacity to 10 MTPA by the second quarter of FY09, from 8 MTPA now. It is also raising grinding capacity by 1 MTPA each at the Kolaghat (West Bengal), Chennai and Salem facilities. In addition, the company will step up wind power capacity from 64 MW to 120 MW by end-FY08 and has targeted to generate 123 MU per annum. We believe that capacity expansion will lead to volume growth. Further, given the fact that power accounts for major proportion of the total cost and cola prices hovering around $125/tonne, the expansion in wind power capacity will help the company to reduce its power cost. The stock may some positives on the update.
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