Cement Q1 Review And Outlook - Volume Growth Inline; Lower Realisation Impacted Performance: Axis Securities

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Axis Securities Report

The companies under our coverage reported a revenue/Ebitda/adjusted profit after tax de-growth of 1%/4%/9% YoY, against expectations of 0%/7%/4% growth. Volume growth during the quarter was in line with our expectation of 5%.

Ebitda margins declined by 50 bps YoY, driven by lower realization, although positively impacted by lower costs during the quarter. On a QoQ basis, Ebitda margins fell by 290 bps as realisation/tonne declined by 3% to Rs 5,343 for the coverage universe. Ebitda/tonne for the quarter stood at Rs 816, down 18%/6% QoQ/YoY.

Realization/tonne decreased by 3%/5% to Rs 5,343 QoQ/YoY as most regions experienced a decline in cement prices. Cost/tonne stood at Rs 4,531, down 5% YoY and flat QoQ, as power/fuel costs softened by 23% to Rs 1,041/tonne.

Performance among companies in our coverage universe was mixed, with JK Cement reporting better-than-expected results. Conversely, Birla Corp, Ambuja Cement, ACC, and Heidelberg Cement performed below expectations.

No new capacities were announced during the quarter. However, Ultratech Cement, Dalmia Bharat, Shree Cement, and JK Cement commissioned new capacities of 8/2/3/2 mtpa, respectively, during the quarter.

Already announced capacities are progressing well and are expected to be operational as per the given timelines.

Management indicated that softness in cement prices is likely to persist until Q2 FY25 due to current muted demand. Competitive intensity has escalated as the industry consolidates and pricing came under pressure.

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Axis Securities Top Sector Ideas Cement.pdf

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