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Jun 27, 2012, 09.47 AM IST
HeidelbergCement India is a safe bet in cement sector from next one year perspective, says Aashish Tater, Head of Research, Fort Share Broking.
Tater told CNBC-TV18, "If you see the recent run up on cement stocks, we feel this is getting staged but there are stocks which if someone has a horizon of next one year, they might be rewarded much handsomely than taking a call on the frontliners."
He further added, "Heidelberg is picked because of two reasons, A] the parentage and B] the capacity is going to get doubled very soon. They have already on the verge of completion their expansion, which will lead to six million tonne capacity from current 3.08 million tonne but that is not justified by the price."
"If I adjust for the debt on the unsecured loan part, the conservative price estimate roughly works out to be Rs 38. Now I was working with my regression models and the weighted average price hike we got was Rs 28. So from Rs 28 to Rs 38 if there is a shift of Rs 10 that means a stock should go and test that Rs 42-44 mark, which roughly values the company at approximately USD 52-53 RCV basis which is relatively cheap compared to what the companies have been trading."
"Now we ignored the major players and took a call on the south based companies, there also the valuations are roughly around that USD 48-55 mark. So even if I take a conservative call of USD 45 RCV, it roughly works out to be atleast Rs 38-40."
"Now here is the call where you have a foreign parentage, the company is going to trade at the lower value that any cement company derives on 6 metric tonne capacity. I think this is one stock which is a safe bet into cement sector from next one year perspective and getting 30% return even in this challenging scenario for someone who wants to be in cement stocks. I think this is the safest bet in the sector in the smallcap and the midcap space."
Disclosure: Safe to assume the stocks discussed have been recommended to clients. No personal position.
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