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ICICI Securities Report
Sustained competitive intensity is set to mark Q2 as yet another weak quarter in FY25 – seasonality-led QoQ decline notwithstanding. Impact of ~7–8% YoY drop in cement prices (down 2–3% QoQ) is amplified by other usual suspects like –
low volumes – owing to heavy monsoons and delayed Union Budget (which impacts government spending); and
low operating leverage.
We project coverage Ebitda to plunge 26% YoY (down 16% QoQ in H1 FY25). While Street may find solace in the ‘bottoming-out of margins' theory (played after Q2 each year with hopes of revival in H2), the cement sector could well be staring at yet another bout of earnings downgrade (for consensus as well as our estimate for FY25 on top of those seen post Q1 FY25).
With competitive intensity unlikely to abate over the next few years and ‘consolidation virtues' proving to be a myth so far, we see risk to FY26 earnings as well. We stay neutral on the sector.
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