Cement News

steel stocks outlook: Could cement and steel once again be in focus in 2023? Aveek Mitra answers


“In a global recessionary situation, how the steel sector will do I am not really very sure but cement is a local industry. It is a geographically concentrated industry and that depends on where the cement plant is situated, what is the hinterland they are catering to and how far they are from their coal mines and raw material side,” says Aveek Mitra, Founder & CEO, Aveksat Financial

New age companies have seen a big decline. Are you a fan of any of these new age companies or do you expect more corrections?
We were not invested in new age companies till a few days back and we have very recently invested in one. We always had this problem of valuation about the sustainability and the continuity of the business model and the path to profitability. All these issues had kept us away and we did the right thing because most of the valuations have corrected substantially and investors made huge losses on those investments over the last one year.

A few of these companies where we feel the valuation has come to a level where it can dip into those areas and where we can see a path to profitability. We have recently invested into one, not in

or , but yes, in the space where a steady revenue possibility is there. There is only one company in this sector and they are in the online space.

Secondly, the sector needs to be looked into now because increasing cost of money and drying up of VC and PE funds into the sector will leave them with a breathing space to grow their businesses without competition breathing down their shoulders. So opportunity is there for these companies and we will be selectively looking into it.

Do you think some of these traditional sectors like cement and steel could once again be in focus in 2023?
Yes, possibly so, because whatever we are reading in the papers about the construction sector, if it is true, then the construction sector demand will come up. That is one side of the story. The other side of the story is that the government is really putting a lot of money into the infrastructure sector. All this augurs well for this but how much the price will go up for steel will depend on global demand and supply situation.

« Back to recommendation stories



In a global recessionary situation, how the steel sector will do I am not really very sure but cement is a local industry. It is a geographically concentrated industry and that depends on where the cement plant is situated, what is the hinterland they are catering to and how far they are from their coal mines and raw material side and how long a distance that cement has to travel to reach customers. All these things decide the valuation of the cement company ata particular time; so that is one side.

The other side is that there is a consolidation happening in this industry and also new companies are coming into this business with very large capitals. Keeping that in mind, we are selectively investing in cement but our present investment is very low, almost insignificant. We will look into it as the time goes by and then we will make the decision. Also we will need to see how the rural demand and rural housing is going. Based on that, we will take the decision on taking any serious exposure in the cement sector.

But we look at the last three years do not you think a lot of these steel companies have paid back their debt, improved their balance sheet, announced capex at a slightly asset light model or are going slow and not taking debts, similar is the case with the cement companies, so what do you make of this improvement in the balance sheet that they have now?
Yes, obviously all these have made improvements in the balance sheet specifically a completely debt within companies have reduced but I think that those things are already known so as an investor I need to see that I have to pick 25 stocks and I have to see that I am picking up the best 25 stocks for my investors.

So yes, these are good but are they good enough to be part of the portfolio? Till now, I do not think that is the case. There are enough opportunities out there in the market right now to put my money in where investors can expect a decent predictable growth because I need to see that this is also coming. This return is also coming in a manner where volatility to a large extent is managed by us; that is our job as a fund manager.

So keeping that in mind, I am not yet invested into the cement in a big way and no investment is there on steel. I do not think in foreseeable future we have a plan of investing in steel, except one company which is actually supplying ore that is the company where we are invested in because we think when the China opens up, there is a possibility of that company doing well because they are large exporters of ores to China.



Source link