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You are here : Moneycontrol » News » Udayan's comments

Cement sector to face lots of headwinds

Published on Wed, May 21, 2008 at 10:29 , Updated at Wed, May 21, 2008 at 14:34
Source : CNBC-TV18

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CNBC-TV18 Executive Editor, Udayan Mukherjee:

 

Cement sector got hammered so much that people will now start talking about the trading bounce in cement and that might well happen because its got hurt too much. Its been the biggest dog for the last one year, its got oversold and its come to that point, where people are saying can we just play a bit of a pullback trade and what might just happen because stocks have come off quite a bit.

 

I was looking at valuations this morning on cement but on the P/E basis they are mostly trading in that 9-10-11-12 kind of P/E, which looks attractive but again lot of supply is coming in, so you can’t trust the earnings in the sector going forward. So you don’t know whether P/E is right way to look at it, if you look at EV per tonne, most of these frontline cement companies are still in USD140-150/tonne category range, is that the cheapest cement that we can find across the world, I don’t think so. So on a P/E multiple they have come off quite a bit but still given the headwinds I suspect they don’t look particularly compelling. So can you play for a 10% bounce in cement sure that would be a trading bounce but longer-term there is too many headwinds to fight against as you heard from the ACC management yesterday.

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