Indian Cement Sector Q2 Results Preview - Soft Demand, Lower Prices Continue To Hurt Earnings: Systematix

Systematix Research Report

Cement companies under our coverage are expected to be severely impacted by persistently weak prices and declining volumes. Demand remains sluggish due to monsoons and slow government infrastructure execution.

Cement prices bottomed out in August after which there were price hikes in the range of Rs 35- 40/bag; however, only ~Rs 10-15/bag got absorbed and the rest was rolled back.

Despite cement prices touching a multi-quarter low, hopes of a substantial recovery remain bleak until a strong demand revival. Volume for companies under our coverage is projected to fall 13.6% sequentially where companies like Ultratech Cement (-15.1%), Ambuja Cement (-16.1%), ACC (-15.0%) are expected to have the biggest degrowth in volumes due to the high base effect.

Net realisation is also expected to fall 2.1% QoQ for the companies under coverage. Revenues is also expected to de-grow by 15% QoQ (-6.7% YoY), which is expected to bring down profit after tax by 49% (46% YoY).

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