Cement names to hit high notes on renewed focus on infra: Mayuresh Joshi, Angel Broking

In a chat with ET Now, Mayuresh Joshi, VP, Institution, Angel Broking, talks about the cement stocks.

ET Now: What are you recommending in the cement pack? During the first half of this week we saw Ambuja, ACC and UltraTech doing their bit. What is your take on it?

Mayuresh Joshi: We are looking at ACC from a long-term perspective. It still possesses one of the strongest balance sheets when it comes to the tier-I cement players.

From a valuation perspective, it is trading at much lower than the replacement cost. It is trading somewhere close to $125 a tonne against the replacement cost of $140, while UltraTech and its other peers are trading at much higher levels than the replacement cost.

Again, the cement industry recovery hinges on the kind of demand outlook that one can assume for the industry to come through on a fast track basis assuming that macroeconomic activity recovers faster than what most pundits are presuming. The kind of ROEs and utilisation levels for the entire sector that we are seeing is encouraging; utilisation levels are at 70% while ROEs are at around 10%. These would gradually improve further.

So, with housing sector — which is one of the biggest contributors to cement demand — picking up steadily, cement companies should do well going ahead. The government's focus is coming back there in terms of smart cities, in terms of improvement of low-cost housing, in terms of providing housing for all. That would augur well for the cement sector overall.

Within the sector, we still prefer ACC from the large-tier names.