Like UltraTech, Shree Cement among largecap cement names; can accumulate stocks on dips: Parag Thakkar

In a chat with ET Now, Parag Thakkar, Head Institutional Sales, HDFC Securities, talks about cement companies.

ET Now: Are you constructive on cement sector? I know that somehow the quarterly numbers have not been the best and cement companies are under a bit of pressure as well. What would you do? Do you believe that these stocks could be available at better valuations? Can we get stocks like Orient and Sanghi that you are advocating at better valuations? I have no doubt that they are great companies. But, can there be better buys at lower levels?

Parag Thakkar: No. There may be some stocks in the cement sector where there are huge competitive advantages. For example, Sanghi has huge limestone reserves.

For Orient, the company has recently commissioned a plant in southern India, which will take its earnings up.
The overall prices in the southern market are also holding on. Infact there is lot of pressure in the market across north and west India. Therefore, our view is typically stock-specific in nature. Otherwise, there is a pressure at the ground level that nobody can deny…

ET Now: What has happened to the largecaps such as Ambuja Cements and UltraTech Cement? Of late, these stocks are seeing some pressure.

Parag Thakkar: In my view, the longer term story for cement remains intact. There is going to be infrastructure investments, thanks to the government thrust.

That said, rural housing has slowed down, at time when no capex is happening. Even the urban housing demand has slowed down significantly. Therefore, it will take a while for cement demand to turn up.

Also, because of the oversupplies, there will be pricing pressures whenever cement demand shrinks.

Cement is anyway a cyclical industry. So when UltraTech Cement touched the levels of Rs 2,600-2,700 the last time we met, we aggressively recommended it. That is a good price to buy the scrip. In the largecap space, we would like to stick to UltraTech and Shree Cement on dips.