See low margin of safety in largecap cement stocks: Parag Thakkar

In a chat with ET Now, Parag Thakkar, head Institutional Sales,HDFC Securities, shares his view on cement stocks.

ET Now: Would you buy into cement theme right now with a view of say next three to four quarters? A lot of people are talking about the government spend coming up and cement should be a naturally beneficiary, almost all interpreted.

Parag Thakkar: Yes. Be it roads or any form of infra, cement is a natural beneficiary of the revival in infra cycle.

Now the point is, in the largecap cement space, you have companies which are trading at $180-$220 a tonne, which is far above the replacement cost.

So the margin of safety is lesser. UltraTech Cement saw a beat on expectations, but on the absolute basis, the results were not that great. We expect, it is not only cement, but all those companies which will benefit from lower global commodity prices — be it crude oil or coal, those are the themes which will play out over next two to three years. Coupled with that, in some of the cases like cement or in commercial vehicles, you have a uptick in the government spending also.

Remember, commercial vehicles have shrunk by 45 per cent in two years. It has to get back to where it was then itself will create lot of opportunities.