Cement Q2 Results Preview - Quarter Affected By Heatwaves, Monsoon: PL Capital

PL Capital Report

We expect our cement coverage universe to report revenue/Ebitda/PAT degrowth of ~5%/14%/40% YoY (de-growth of 15%/24%/45% QoQ) given the sharp decline in pricing in a quarter affected by monsoon and heatwaves.

Demand was tepid due to weak construction activities and lack of government projects. The start of the quarter was weak due to heatwaves followed by monsoon across regions, which led to decline in demand and slowdown in construction activities.

Pricing remained under pressure (declined 2-4% QoQ) across regions, especially for South and East where prices fell on average 4-5% QoQ. There were multiple attempts to hike prices by companies during the quarter, but due to monsoon, floods and lack of infrastructure activities, price hikes had to be rolled back, which kept cement realizations under pressure.

We expect demand to gradually improve once monsoon recedes and government spending on infrastructure projects picks up followed by price hike announcements by companies across regions, which would aid H2 FY25 earnings.

We cut FY25E Ebitda by 6-10% on weak H1 and expect earnings to improve as demand picks up from Q3 FY25. Key monitorables to watch out are:

1. demand scenario amid festivals,

2. sustainability of recent price hikes, and

3. intensifying competition.

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