However, the second is traditionally a soft quarter for cement producers from the demand point of view, considering the fact that monsoon hits construction activities.
Revival of retail and institutional demands on the back of receding monsoon and pick up in construction activities owing to lower prices of building raw materials are likely to aid cement companies going ahead.
India’s cement sector profitability (EBITDA/tonne) is expected to bottom out by 2QFY23 and may scale new highs by FY25 as it is likely to pass on most of the cost escalations by then, said Antique Broking in its report.
Antique Broking expects average EBITDA/tonne of companies under its coverage to increase from Rs 970/tonne in FY23E to Rs 1,320/tonne in FY25E. This may be achieved by declining fuel costs, improved demand and higher government infra spend.
“We see upside risks to FY24–25E consensus earnings. Our coverage universe’s FY24–25E EBITDA are 10 per cent ahead of consensus,” it added. “We prefer north and west regions, which are likely to see minimal capacity additions over FY23–25E.”
Antique Broking, overweight on the sector, has upgraded , , to ‘buy’. It has also initiated coverage on Nuvoco Vistas with a ‘hold’ rating. It likes and , too.
Domestic brokerage firm Axis Securities expects cement volume and revenue to grow by 9 per cent and 14 per cent, respectively, on a year-on-year basis (YoY) owing to better demand and higher realisation.
However, EBITDA and adjusted profit after tax (PAT) are expected to contract sharply by 33 per cent and 50 per cent YoY, respectively, owing to higher costs of power/fuel coupled with lower realisation QoQ, it added.
“We estimate overall cement industry demand to grow between 8 and 9 per cent in FY23, driven by the factors mentioned above,” Axis said. “Higher input costs, particularly fuel prices, have remained to be the major concern for the cement companies.”
Axis Securities prefers
and from the large-caps, and JK Cement from the mid-cap segment and from the small-cap segment.
Anand Rathi Research picked Birla Corporation, Ramco Cements, Dalmia Bharat and .
“Our channel checks suggest industry volumes in September 2022 may report high single-digit MoM growth owing to lower prices of steel and cement, lower rainfall in high-density areas and pick-up in infrastructure projects,” said
On the pricing front, average pan-India prices were flat MoM in September, but up 5 per cent YoY. Healthy volumes during dull season indicate robust volumes in the upcoming season, ICICI Securities added.
ICICI Securities has ‘buy’ call on UltraTech Cement,
, Shree Cement, Nuvoco Vistas, JK Cement and ‘add’ rating on Dalmia Bharat, Ramco Cements, Orient Cement and . It only suggests from the pack.
According to Anand Rathi Research, dealers across regions have predicted that demand would be subdued in October owing to festival holidays, leading to labour unavailability and restricted truck movements.
While companies across regions, except in central India, are planning to announce price hikes between Rs 10 and 40 per bag, dealers suggest they would sustain despite weak demand.
The brokerage firm prefers
, Ramco Cement, Dalmia Bharat and Orient Cement. “Weak demand persists in central India. This is a key reason restricting companies from price hikes.”
(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of Economic Times)