InvestorQ : Why is Morgan Stanley so positive about cement companies in India?
Arti Chavan made post

Why is Morgan Stanley so positive about cement companies in India?

Rutuja Nigam answered.
8 months ago

One of India’s leading FII brokers, Morgan Stanley, has been in the Indian markets for close to 30 years now. In a recent report, Morgan Stanley Research has noted that overall the cement companies in India could be on the cusp or rather the beginning of a new upward growth cycle. Therefore, Morgan Stanley expects that most of the cement stocks trading in the Indian markets would be able to create sustained value in the medium to long term.

It sees both demand and supply factors coming into play in making the sector more attractive. It expects broad-based and above-average demand growth of around 9% annually over the next 3 years. It has also, in addition, upgraded earnings estimates by 1%. The operating and net margins are also expected to remain robust. In short, the pricing power in the cement industry is likely to return to the hands of the producer.

Historically, when the bargaining power has shifted to the hands of the producer, that is when cement companies have given their best performance. Morgan Stanley has upgraded Grasim Industries of the Aditya Birla group to overweight while it has retained overweight on Ambuja Cements and Ultratech, another Aditya Birla company. However, Morgan is broadly neutral on Shree Cements and ACC while it is underweight on Dalmia Bharat.