Cement Sector - Risk Reward Turning Unfavorable: Nirmal Bang
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Nirmal Bang Report
Cement stocks are hitting new highs as demand revival and stable pricing are keeping profitability and growth prospects elevated.
While demand revival has been better than most bullish expectations on the street, we believe that the market is neglecting a few near term risks to earnings and commodity nature of the business.
We also believe that current valuations are fair but leave nothing on the table for any unexpected risk to earnings.
Commodity stock multiples generally deflate on peak profitability but currently both profitability and valuations are surging at the same time, thus opening up the possibility that one of it should come off soon.
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