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Thematic (Sector/Industry)

<ul><li>Media reports are ablaze with talks of a potential exit by Holcim from Indian markets</li><li>Neither Holcim nor its Indian subsidiaries Ambuja and ACC have offered any comments on the same so far</li><li>Our analysis suggests India remains a major market for Holcim and its Indian cement operations lead, with a lower carbon footprint</li></ul>Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Media reports are ablaze with talks of a potential exit by Holcim from Indian marketsNeither Holcim nor its Indian subsidiaries Ambuja and ACC have offered any comments on the same so farOur analysis suggests India remains a major market for Holcim and its Indian cement operations lead, with a lower carbon footprintContent is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

Cement (Update): Is Holcim’s green focus reason for its India-exit stories?

Partner and Fund Manager, River Valley Asset Management

Jamshed Desai

Partner and Fund Manager

Singapore-based boutique asset management firm

River Valley Asset Management

River Valley Asset Management is a Singapore-based boutique asset management firm. Our team at RVAM strongly believes in being a trusted steward of our clients' wealth across generations.

Each of our fund managers has years of rich portfolio management experience over multiple market cycles at world-class investment houses. We bring our clients the combined strength of our investment team to manage their financial portfolios and to provide bespoke guidance on all aspects of their financial health.

We offer multi-asset class expert investment advice to accredited investors who are family offices, high net worth individuals and institutional investors to preserve and grow our clients' wealth.

The fund management team of the company includes Homiyar Vasania, Anand Ramachandran and Jamshed Desai.

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade. Capacity additions have seldom been smooth or orderly in any country.  Overcapacity has led to weak prices across the region. The weakness in each country has been impacted by one or more factors germane to them. While demand growth has sustained in the mid to high single digits, the sheer growth in the number of new players in many markets has meant that pricing discipline has been sacrificed at the altar of volumes.As if the twin blows of overcapacity and weak demand were not enough, coal prices have been rallying hard for over a year now. While ASEAN has a quite a few listed cement companies, given the overcapacity situation prevailing currently, most investors are likely to be put off and adopt a wait-and-watch stance. When industry profitability is at rock-bottom levels, conventional valuation ratios such as P/E often do not help. Given that the industry is a long-cycle one, past experience shows that investors use different metrics at different stages of the cycle. As the industry profitability picks up, investors either move to EV/EBIDTA multiples to value stocks or combine it with P/E as growth becomes palpable, jettisoning EV/ton as a metric, which is perhaps of most use currently. Another strong indication of an industry in the throes of problems is significant consolidation and/or mergers and acquisition activity. There has been talk of some smaller players capitulating to the bigger ones, but we have not heard any concrete announcements yet.The pressure points for the cement stocks are well understood by investors today. A reversal in one or more of the three critical variables (price-volume-costs) will potentially nail a floor to their stock prices. This could happen in the short to medium term in some markets. The key then is to track these closely in what is now a much unloved sector, but where asset values are looking cheap selectively in absolute and relative terms for the first time in a more than a decade.

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade. Capacity additions have seldom been smooth or orderly in any country.  Overcapacity has led to weak prices across the region. The weakness in each country has been impacted by one or more factors germane to them. While demand growth has sustained in the mid to high single digits, the sheer growth in the number of new players in many markets has meant that pricing discipline has been sacrificed at the altar of volumes.As if the twin blows of overcapacity and weak demand were not enough, coal prices have been rallying hard for over a year now. While ASEAN has a quite a few listed cement companies, given the overcapacity situation prevailing currently, most investors are likely to be put off and adopt a wait-and-watch stance. When industry profitability is at rock-bottom levels, conventional valuation ratios such as P/E often do not help. Given that the industry is a long-cycle one, past experience shows that investors use different metrics at different stages of the cycle. As the industry profitability picks up, investors either move to EV/EBIDTA multiples to value stocks or combine it with P/E as growth becomes palpable, jettisoning EV/ton as a metric, which is perhaps of most use currently. Another strong indication of an industry in the throes of problems is significant consolidation and/or mergers and acquisition activity. There has been talk of some smaller players capitulating to the bigger ones, but we have not heard any concrete announcements yet.The pressure points for the cement stocks are well understood by investors today. A reversal in one or more of the three critical variables (price-volume-costs) will potentially nail a floor to their stock prices. This could happen in the short to medium term in some markets. The key then is to track these closely in what is now a much unloved sector, but where asset values are looking cheap selectively in absolute and relative terms for the first time in a more than a decade.

ASEAN Cement's Cast of Woes Is Brimming Over…Yet Value Is Surfacing

Philippines

Holcim Philippines Incorporated manufactures and distributes portland cement and pozzolan cement.  The Company was incorporated in 1964.

Holcim Philippines (HLCM PM)

Cement (Update): Is Holcim’s green focus reason for its India-exit stories?

Media reports are ablaze with talks of a potential exit by Holcim from Indian marketsNeither Holcim nor its Indian subsidiaries Ambuja and ACC...

HDFC Securities

ASEAN Cement's Cast of Woes Is Brimming Over…Yet Value Is Surfacing

The cement and building materials industry in Asia, more particularly in ASEAN, has seen dramatic additions in capacity over the last decade....

River Valley Asset Management