Cement Q3 Preview: Volumes growth, costs to moderate as price hikes aid earnings
The overall Cement demand in the country remains strong led by government led infrastructure spending. There was some impact of festival season, state elections and region-specific challenges, such as lower sand availability in Odisha and Nagpur, temporary impact on construction due to pollution curbs in Delhi National Capital Region (NCR) alongside the impact of cyclone on Telangana. As a result, the industry is expected to see some moderation in growth in year-on- basis.
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Analysts at Elara Securities India Pvt Ltd , expect companies in their coverage universe to report volume growth of 6% YoY and 3% sequentially. The outliers are likely to be JK Cement on the positive side and Nuvoco Vistas Corporation on the negative side s per Elara. Among large caps, Shree Cement should lead in year-on-year volume growth while JK Cement among midcaps.
Analysts at Motilal Oswal Financial Services estimate 7% YoY volume growth for their coverage universe with industry capacity utilization of ~80% . They said that Cement volume growth moderated during the quarter due to subdued demand in rural and housing segments as well as a few regional headwinds such as state elections, floods, and construction bans.
The cement companies had taken adequate price hikes in the September quarter and some prices hikes at start of December quarter Though there was some moderation in prices thereafter nevertheless realizations for the companies are still likely to remain higher on y-o-y basis and sequentially.
Analysts at Elara expect realization of our coverage universe to rise by 2% YoY and 2% sequentially. Cement firms with higher exposure to East and South India should report a sharper improvement in realizations.
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The price hikes were led by Eastern region while West India also saw good price hikes.
On profitability front Cement manufacturers will also benefit from lower operating costs, led by lower fuel prices and internal cost-saving measures. Analysts at Elara expect operating cost per tonne to fall 4% y-o-y and 2% sequentially. Overall, they expect EBbitda per tonne to jump by 43% YoY and 22% sequnetially led by steady volume, healthy realization and a fall in operating cost. Those at MOFSL expect average Ebitda per tonne to increase 47% year on year and 26% sequentially to ₹1119, benefitting from price improvement and cost reduction. Birla Corporation and JK Cement are estimated to report robust year on year growth in Ebitda due to benign base of last year.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
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Published: 10 Jan 2024, 04:48 PM IST
