Most manufacturing industries are affected by crude prices, in varying degrees. If not as input / fuel, then in the distribution / logistics, as diesel becomes more expensive. From your phrasing, I guess you are most concerned in the “oil / petcoke as a fuel” element. Sanghi is one of the best placed in this respect. Its facility has the flexibility to change the mix of petcoke / coal / lignite, based on whatever makes most sense. It is one of the things I like about Sanghi.
Don’t get alarmed by share price volatility; look at the company’s performance and management’s intent.
The demand side can be tricky. Housing has clearly taken a hit, with land / home prices at unsustainable levels and facing a correction, accelerated by demonetization, GST, RERA et al. The housing sector is a big consumer of cement. Infra is not as large usually.
My thesis here though, is that this is a company that has management which is working hard, and hustles well. It has excellent limestone reserves. Flexibility in terms of fuel usage (which I talked about earlier). Close to port, and has own jetty and ships also now. Adding capacity. When the cycle turns, this will suddenly see a huge upside. Who knows, even things like the Mumbai-Ahmedabad bullet train could act as a trigger - will need lots of construction material.
When things are rosy, you will not get these prices. You have to look at the strengths of the company, see if it can survive tough times, and then grab it if it is cheap vis-a-vis the opportunity.
I have two disclosures:
- I am invested, and from low levels (lower than they are even with the recent fall)
- I also have a hedge, in that I am also invested in GMDC - a lignite miner (among other things), which counts Sanghi as one of its customers. If petcoke / coal / lignite prices rise, GMDC will benefit, and serve to offset the erosion of profit in Sanghi (this is assuming Sanghi is not able to pass on any price increase). I have entered GMDC also from low levels