Negative outlook for Cement sector: Pankaj Pandey

Pankaj Pandey, Head of Research, ICICI Direct, in a chat with ET Now, shares views on Banking sector


What would you do with the cement pack? Would you buy into any value stocks if at all?


As a sector, we have a negative view on the cement pack. If you look at FY10, we had a growth of about 10% in terms of volumes.

The growth slipped to about 4%. In FY12 at best, we are expecting about 6.5% kind of a growth. Last year we had capacity utilisation of about 77%.

Now this year we are expecting that 6.5% kind of a growth, you would have incremental demand in the range of 14 million tonnes and that is what their likely supply, which would be there. Plus the noises are still confusing in terms of the kind of strength of the demand.

So if the demand is slightly below 6.5%, the pricing power or the prices, which are holding at current levels might come down, so you have a pressure both in terms of realisation, in terms of volume growth.

In terms of valuation if you look at, the large-cap tier 1 companies are trading about $115-120 EV per tonne, so which is very closer to the replacement costs.

The mid caps are trading at a significantly far more discount at 55-60% odd. In terms of certain stocks, mid-cap stocks one can look at, which are based on central region where the demand is slightly better, the strength in pricing is there. So probably Heidelberg is what we would like from that perspective but cement we are not expecting any great set of numbers for the next one year.

Any stock picking should happen from a 2-year plus perspective.