Chakri Lokapriya on his Diwali bet and why he likes it

“As the construction market kind of settles to the new level of interest rates, we will see some amount of volume pickup for the cement names. I think JK Lakshmi, JK Cement, Ramco Cements will look fine valuation wise,” says Chakri Lokapriya, CIO & MD, TCG AMC

What about the cement pack? The earnings have been a washout whether in terms of ACC or Shree Cement or even Heidelberg Cement. But all the stocks are heaving a sigh of relief that the numbers are not worse than expected. Is it really worth taking a bet on at this point of time or would you say it is better to avoid the entire space?
Among the industrials/construction to which cement belongs, I think cement looks good despite ACC’s miss. Now ACC had its own set of reasons, some of it company specific because of various well known factors; whenever interest rates move up sharply, construction activity, industrial activity slows down waiting for the peak of interest rates to settle in.

Now we are closer to the top interest rates than we were six months ago and the move has been very sharp but despite all this, the valuations have been very-very undemanding for the cement sector. So as the construction market kind of settles to the new level of interest rates, we will see some amount of volume pickup for the cement names.

I think JK Lakshmi, JK Cement, Ramco Cements will look fine valuation wise.

Pidilite is one of the slow and steady movers but for the last six months it has eked out a 14% on YTD basis. It is up 9% today. Of course it is up 3% on back or expectations that when HDFC Ltd gets out of Nifty, Pidilite could be one of the entrants to the Nifty 50 pack. What is your take?
I think fundamentally Pidilite looks good and it will revive as its business will revive along with a revival in the construction industry. I think that story holds good because it has a cleaner and a more robust balance sheet way to buy the company and valuations actually have been on its side. For the last couple of years, the stock has not done that much but Pidilite will benefit from a revival in the economy and therefore Pidilite is worth considering at the current valuations.

What would your Diwali bet be?
UPL is a Nifty name and a large company. It has been down partly because of fears that their performance in Europe will be weak. Yes, it will be weak but the other geographies in which it operates look very strong including India. The stock trades at a very low valuation of about 9 times for a business of its size and a company of its size. The stock clearly offers sufficient upside over the next six to 12 months.


(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)