Similar P/E for cement & IT 'extraordinary': Kotak Institutional Equities

Brokerage says IT services firms score over cement on key parameters such as return on average capital employed, free cash flow to Ebitda ratio, dividend, and buyback payouts vis-a-vis PAT

Many stocks in the cement sector are trading at similar valuations or higher valuations to companies in the information technology (IT) sector, which domestic brokerage Kotak Institutional Equities (KIE), finds “quite extraordinary.”

“It seems that the market is either applying different valuation principles to the two businesses or assuming the two businesses are similar. The latter is certainly not true given the cyclical, commodity and capex-intensive nature of the cement business versus the high return on capital employed (RoCE) and high cash-generation nature of the IT services business. The former may reflect anchoring bias,” say strategists at KIE led by