Cement Maker With Biggest Earnings Cut Offers Highest Potential Returns
The cement maker that has seen the biggest cut in earnings estimates is expected to offer the highest returns.
Orient Cement Ltd.’s earnings per share has been slashed by 52 percent so far this year, the biggest cut among cement companies with a market capitalisation of at least Rs 1,000 crore, according to Bloomberg data. Analysts from Elara Capital, Emkay Global and HDFC Securities lowered earnings forecast because of higher costs and lack of pricing power in the south, which eroded its profitability.
Still, the stock offers 22 percent returns, the highest among peers, according to Bloomberg. Orient Cement has tumbled more than 53 percent so far this year. That compares with a 3-50 percent fall among peers. The NSE Nifty 50 Index gained 3.4 percent during the period.
The proposed waste heat recovery capacity expansion at the Devapur and Chittapur plants in Karnataka, focus on a greater proportion of Portland Pozzolana or blended cement volumes, better realisations and cost cuts are expected to help improve its earnings, according to a report by Anand Rathi. Lack of pricing discipline in the near future and excess supply due to announced capacity expansions in the region, however, may pose a risk, the brokerage said.
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