Indian analysts suggest that JK Cement, JK Lakshmi Cement, Birla Corporation and Century Textiles currently appear most attractive on mid-cap valuations. Given that the asset valuation of some of the smaller companies now appears attractive on current capacities and even more on expanded capacities, we could see some industry consolidation, analysts said.
In the past few years, the domestic industry has witnessed some buyouts, leading to creation of two major groups” ACC-Gujarat Ambuja under Swiss cement major Holcim and Grasim Industries-Ultratech under the Aditya Birla Group. This means that there is very little scope for consolidation among top cement companies and analysts, therefore, see lot of scope for M&A activity among the smaller companies, which may push up valuations.
While analysts do not see cement imports as a big/immediate threat to the sector, the industry will need to take a moderate stance on this issue as it would not want imported cement to establish a foothold in the country, which can then become a long-term threat, once the importing infrastructure improves,the investment bank noted.