Hi Rupesh,
I had a difference of opinion on few points and hence stating them with due respect:
1. Cement firms are normally valued on an EV to Capacity basis and EV to EBITDA basis and looking at PE might not be the right way to look at a cement company. (However size of the plant, geographical location, mgmt. quality, etc.,. should be considered as well).
2. In cyclical businesses earning swings can be very wide and hence I am not a big fan of looking at EPS or average there offs and I think that one should take a broad macro call on the economy (Earnings swings is also one of the reasons coz of which cement companies should not be valued on a PE basis). So if one feels that the stock might have bottomed out and macros will improve resulting in a sustained period of demand off take then one should invest. (one might like to consider other supporting factors as well while taking a call, say company with better margins, low debt, etc.,. in the sector per se) I personally prefer going with decent sized players in such an industry but if there is good undervaluation in a small player with good visibility of earnings ahead, reducing debt, improving margins, etc, etc.,. then I don’t mind a small cap/small capacity player too.
3. ROE and ROCEs can fluctuate too coz of the nature of the business (Shree maybe an exception and hence has been rewarded over the years, although I don’t have a view on it. Just stated this trying to pre-empt just in case Shree might be quoted).
Discl: I am an amateur investor and might be biased in my views as I am positive on cement as a sector since last 2 qtrs. Apart from positive commentary from some mgmts. at a ground level have heard from transporters about increased cement movements and some government spending etc.,. actually kicking in.
Invested in NCL industries as well since sometime due to reasons already covered by few boarders in NCL thread and due to my views expressed above.