Cement Q1 Results Review - Volumes Shall Continue To Drive FY23-25E Earnings Recovery: Dolat Capital

Dolat Capital Report

Our universe (13 stocks) reported +15.2% YoY (-1.8% QoQ) revenue of Rs 501.3 billion in Q1 FY24 led by +18.2% YoY in volume to 89.4 million tonne (-1.4% QoQ), which was partially offset by -2.5% YoY (-0.4% QoQ) in blended realisation/tonne to Rs 5,607.

Ebitda +9.5% YoY/ +1.2% QoQ to Rs 82 billion and blended Ebitda/tonne +2.7% QoQ (-7.3% YoY) to Rs 917 led by -0.9% QoQ (- 1.5% YoY) in blended cost/tonne to Rs 4,690 which was partially offset by - 0.4% QoQ (-2.5% YoY) in blended realisation to Rs 5,607.

Accordingly, adjusted profit after tax grew by 4.9% YoY to Rs 39.6 billion (+4.9% QoQ) in Q1 FY24.

On YoY basis, all companies reported revenue growth in Q1 FY24 (except Sagar Cements Ltd.) with The Ramco Cement Ltd. reporting highest growth of 26.4% and Sagar Cements lowest growth of -3.2%.

Volumes – all companies (except Sagar Cements) reported growth with Ramco Cements highest (+28.7%) and Sagar Cements lowest (-0.6%). Realisation/tonne – all companies reported de-growth (except Sagar Cements) with Heidelberg Cements India Ltd. highest (-6.7%) and Sagar Cements lowest (+0.1%).

Ebitda/tonne – all companies reported de-growth (except ACC Ltd., Ambuja Cements Ltd. and Birla Corporation Ltd.) with Sagar Cements highest (-49.8%) whereas ACC posted highest growth (+46.8%).

We are cautious on increasing probability of higher incremental capacity addition versus incremental demand over next five‐seven years, which will restrict realisation growth.

Our analysis suggests that volumes shall continue to drive FY23-25E earnings recovery, as was the case historically (FY18-FY23). We estimate revenues to grow at 8.1% compound annual growth rate over FY23-25E primarily driven by 8.9% volume CAGR, which will be partially offset by -0.7% (~3.1% CAGR over FY18-23) realisation CAGR.

However, Ebitda to grow at 25.2% CAGR over FY23-FY25E primarily driven by 8.9% volume CAGR coupled with -3.7% Opex/tonne CAGR as Ebitda/tonne to increase at 15% CAGR.

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