Sector Update: Cement - Kotak

Key highlights

- The National Company Law Appellate Tribunal upheld the Rs 63 bn fine imposed on a group of cement companies by the Competition Commission of India for cartelisation.

- Companies are likely to challenge the judgement in the Supreme court and hence the actual impact and timeline of provisions is difficult to ascertain right now.

- Current valuations may get impacted as higher provisioning may be required by the companies and it may result in some de-rating of the sector with companies not being able to enjoy higher valuation multiples. However, we continue to believe that pricing power would not get impacted completely.

- We would turn cautious on the sector owing to the impending provision which may be required to be made. However, we continue to remain positive on companies where growth is likely to be led by volume uptick such as Ultratech Cements and Shree Cements.

Source : Equity Bulls

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