2 cement companies that may be worth betting on: Anand Tandon

“Better way to play real estate would not really necessarily be the realty companies themselves but basically the housing finance business of banks,” says independent market analyst, Anand Tandon

What is your view on the real estate and cement pack? What would be your top bet?
Real estate has made a comeback after several years and for most of this current calendar year, we have seen a fairly strong performance in realty. The number on the ground also shows a significant uptick in terms of registrations. It had started off in Maharashtra with Mumbai reducing the rates of registration and that has fuelled a fairly strong rebound in terms of demand.

The demand continues to remain fairly robust for most of the metro cities but we are now getting to a stage where some of the catch up that was there for the last two years has been pretty much behind.

So to some extent, supply has started to come up again again and we will get to a stage fairly soon where it will kind of peak out. Are the numbers for the realty companies fully reflective? I would imagine not. They always come with a lag.

Over the next couple of years, we will get fairly good numbers but the better way to play it would not really necessarily be the realty companies themselves but basically the housing finance business of banks and therefore companies which are in that area would be an easier way to consider.

If Ambuja is moving the way it is moving and cement being a commodity and at the end of the day, it is not the brand, it is not really the colour of the cement but it is the cycle which is important here. By that logic, UltraTech should also go higher because in a bull market, one always catches up with the leader; in a bear market you glide down to the underperformer?
Well there is actually a fairly significant difference in the prices that a smaller company gets compared to a UltraTech. I am not talking about Ambuja here, Ambuja is not a small company.

I think it works out to almost to Rs 70-80 which is very significant. In terms of the overall margins, the bigger companies benefit. Obviously. we have expectations that we will see a fight for market share among the larger players because of the change of management and therefore some of the larger companies will also start to try and push efficiency and increase their prices as well.

UltraTech is fairly expensive. If one looks at it on a dollar per ton kind of valuation, it is not cheap. In terms of earnings it is also doing fairly well and generates probably one of the highest revenues per bag.

I do not know how much more one can expect but yes, if the sectoral move is what you are looking at, clearly UltraTech is one of the bigger beneficiaries. If you are looking at companies which will become big, there is a likelihood of volume growth, commensurate with an increase in prices. My own favourite would be something like Dalmia Bharat.


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