Cement stocks may re-rate as M&As pick up: Deutsche

CEMENT-INDIA-AMBUJA-JP-ASSCIATES-ACC:Cement stocks may re-rate as M&As pick up: Deutsche

 

Reuters Market Eye - Deutsche Bank says India's cement stocks are in for a potential re-rating, citing the pickup in merger and acquisitions (M&A) in the sector.

The brokerage says any enterprise value greater than $150 per tonne for the CRH and Jaiprakash Associates transaction could trigger a re-rating for a number of midcap stocks.

Irish building materials group CRH Plc said it was in talks to pick up an equity stake in Jaiprakash Associates' cement operations in Gujarat.

"Historically, large-ticket M&A transactions, in particular Ambuja buying a stake in ACC in 1999, Grasim buying a stake in L&T's cement business (now UltraTech) in 2004, and Holcim buying stakes in ACC and Ambuja in 2005 and 2006, have led to improvements in profitability and valuations in the sector," Deutsche adds.

The brokerage has reiterated Ambuja Cements and Shree Cement as its preferred picks in the sector.

Ambuja Cements was up 1.3 percent, while Shree Cement fell 0.8 percent.