Comments
Cement stocks are up in the last six months; their valuation has jumped well above the three-year averages.
The current PE of Ultratech cement is 44 as against its three-year average of 38, while Ambuja cement and Shree cement quote at a premium of 72 per cent and 46 per cent respectively to their three-year averages.
However, these stocks are not overvalued. Cement is a commodity business with close linkages to GDP growth (1.2x times) and periodic cycles of ups and downs.
The Indian economy is still in its recovery stage, with signs of green-shoots and a potential to clock 7-9 per cent growth over the next four to five years.
The industry’s capacity utilisation at the current levels of 65 per cent has bottomed out and would only improve with pick up in demand.
Moreover, pricing power is back in the hands of producers with signs of consolidation. It could boost profits of market leaders over the next three to four years, thereby lowering PE levels . Stay put.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.