Moneycontrol Bureau
Brokerage house Credit Suisse feels that shares of cement companies are already pricing in the start of an upcycle in the industry.
“Further upside from the current level depends on whether the length of the upcycle is two years or five years. This in turn depends on the extent of capacity additions over next 5 years,” the brokerage said in a note to clients.
“In the last six months (post-election results), around 50 million tonnes of new capacities have been announced and some could contribute from FY18,” the Credit Suisse note said.
According to the brokerage, the last upcycle was cut short by high supply additions during FY08-FY11 which resulted in a sharp decline in margins.
Credit Suisse says it continues to be constructive on the sector and expects demand growth to recover to 8-10% next year. It is bullish on mid-cap names like JK Cement, Dalmia Cement and JK Lakshmi.
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