Cement and Steel Sector

Cement and Steel Sector

Both these sectors can outperform index in 2008.

Companies having backward integration with raw materials in Steel industry are set to benefit .

Steel prices are rising and will rise more in 2008. Raw material prices are also on the rise.

Biggest consumer China has also seen production cost go up significantly.

Indian Steel demand is robust and focus on infrastructure will keep it that way.

Gujrat NRE coke,sesa goa, Tata steel looks good in this sector.


Cement sector is going in for huge expansion to cope up with the demand, but the new capacities will start coming in from first quarter of FY09. Demand and price realization will remain firm in these scenarios. Some government has tried to curb the price rise in cement saying they will import cheap cement from outside. But cement prices are high across asia and so poses no immediate threat to local cement makers.

Till the monsoon kicks in around june-july. These 2 quarters can see huge construction activity.

India Cements, Grasim Industries , Shree Cements looks good if one want to enter this sector.

Value Buying in GE Shipping

Through mail from Abhay.

CMP 437
P/E 5.17
Market cap 6654.37
MarketCap/Sales 2.20

Financials for last 12 months( Jan 07 to Dec 07)

Net Sales 3012.13(2186.31) Up by 37.74%
Net profit 1298.31(825.91) Up by 57.19%
EPS 84.86(54.24) Up by 56.45%

Other players in this segment with their net sales for FY07 (i didn't calculate last 12 months sales for all) & their P/E

Company NetSales NetProfit MarketCap current P/E

ABG Shipyard 704.36 116.29 3717.29 25.06
Essar shipping 1024.30 134.04 10,227.98 60.45
GE Shipping 1990.6 883.31 6646 5.12
Shipping corp 3703.44 1014.58 6405.44 7.54
Among these companies only ABG shipyard is growing at faster rate but on smaller base & has P/E of 25.06 almost 5 times that of GE. Shipping corp also looks cheap but growth has been slow compared to its peers.
MarketCap/Sales ratio of 2.2 & P/E of 5.12 with potential growth of 50% plus makes it very cheap.
Also after the fall in stock price in January it has shown momentum back from 330 levels.

Stock News

Jindal Saw bags Cairn Energy order worth $200m for pipes

Jindal Saw gets Rs 200 crore power project contract

After saw pipes Jindal saw betting on infrastructure for growth.

Punj Lloyd tripped for past few days after heavy unwinding of position by a big broker.Stock to rise soon.

GMR Infra

GMR Group’s Vemagiri power plant will become operational this month.

Hyderabad Airport to be operational by March 08: GMR

Stock will retest it previous highs in 2-3 months.

Chattisgarh to become powe hub of the country. With 40 power plants planned with investment commitment worth Rs 1,58,000 crore. This will help add 39,500 mw in next 8 years.

Lessons learned

Current market turmoil as given lot of lesson to the investors new to the market.
People who were used to get returns just by investing blindly in the market past year have burnt their fingers recently.
Now people should stick to stocks which are fundamentally strong and should stay away from momentum stocks.
Fundamentally strong company can loose a little value in this kind of blood bath but they still retain their inherent value and will have premium in good markets.
We now have huge interest rate differential with US which is around 4.75%. We have to see its impact on capital inflow, dollar depreciation , industries affected, inflation because of inflows and RBI moves because of all these events.

Status quo by RBI recently has not been favorably received by most of the industry.

Indian stock market is at attractive levels now and should do well in coming years based on the growth estimates. Investors have to settle for lesser returns from past years but still it will be better than the traditional saving instruments.

The most important lesson which I have learnt is we always need to keep certain amount of cash aside. When market falls money not invested retains it value and gives you huge leverage when you can buy stocks when they are available at throw away prices.

If you are always 100% invested with all the money you have then when market falls you don't have dough/capital to use the opportunity knocking your door.

It can make huge difference if you buy in the depressed market condition.Though everyone is panicking , if you can hold your sentiments and invest wisely you can gain immensely.

1. Keep at least 15% of liquid cash to cash in on the market opportunities.
2. Buy and increase your holding in value stocks.
3. Always book profit in momentum stocks when market peaks and show sign of weakness.
4. Don't play on margins when market is in turmoil.
5. Don't over leverage.
6. Play only on cash. Don't risk more than you can afford.
7. Buy tax saving instruments when markets are on high and you don't have any alternative. Don't wait for January or February.
8. Buy equity when markets are at there lows.
9. Don't gamble play informed.
10. Don't panic and never loose. Don't convert winning stock into a loosing one.