December 2024 Results Preview | Sector: Cement
Cement
Result Preview
Weak print, yet gradual recovery aligns with expectations
Estimate ~8% YoY volume growth for our coverage universe in 3QFY25
After a subdued demand growth of ~1-2% YoY in 1HFY25, cement demand has
improved in 3QFY25. However, regional headwinds such as pollution-related
curbs in Delhi-NCR, scarcity of sand, and other aggregates in Odisha; and
unfavorable weather conditions (severe cold and unseasonal rains) in certain
regions during the quarter have weighed on overall demand growth. We
estimate our cement coverage universe to report a volume growth of ~8% YoY
in 3QFY25, supported by a low base, pent-up demand, and a pickup in
construction activities. We estimate an average grinding capacity utilization of
~75% vs. ~76%/70% in 3QFY24/2QFY25.
Cement prices have also experienced an upward trend, driven by MoM price
hikes of ~3-5% (INR10-15/bag) in Dec’24 across regions. The all-India average
cement price grew ~2% QoQ (down ~5% YoY) in 3QFY25. We estimate the
blended realization for our coverage universe to improve 1.3% YoY (down ~8%
YoY). Our channel check suggests that industry players may announce additional
price hikes in the near term. However, their sustainability will need to be
monitored. We estimate the aggregate revenue/EBITDA for our cement
coverage universe to decline ~2%/22% YoY to INR428.2b/INR67.8b and OPM to
contract 4.3pp YoY (up 3.3pp QoQ) to ~16%. We estimate the average EBITDA/t
for our cement coverage to decline ~28% YoY (up 28% QoQ) to INR842.
GRASIM’s revenue is estimated to increase 30% YoY, aided by contributions
from high-growth businesses (Paints and B2B Ecommerce). VSF volume/
realization is estimated to grow ~7%/6% YoY and chemical segment
volume/realization is likely to increase ~2%/12%. Overall EBITDA is estimated to
decline 11% YoY to INR4.6b and OPM will be at ~6%, down 2.6pp YoY due to
losses in high-growth businesses. It is estimated to report PAT of INR14m (down
99% YoY) led by higher depreciation and interest costs.
Company
ACC
Ambuja Cements
Birla Corporation
Dalmia Bharat
Grasim Industries
India Cements
JK Cement
JK Lakshmi Cement
The Ramco Cements
Shree Cement
UltraTech Cement
Demand improves; quarter-end price hikes boost OPM sequentially
Cement volume growth is estimated at ~8% YoY in 3QFY25. Volume declined
~10-11% YoY in Oct’24 due to festivals (Durga Puja and Diwali). However, it
recovered in Nov-Dec’24 (up ~18-20%) YoY, aided by a low base, pent-up
demand, and a pickup in construction activities following the monsoon and
festivals. We estimate volume growth of ~10-11% YoY for ACEM (Consol.), ACC,
and UTCEM, followed by ~7-9% for TRCL and ICEM, ~4-5% for DALBHARA and
JKCE, and ~2-3% for BCORP and SRCM. Volume for JKLC is estimated to decline
~2% YoY.
The average opex/t for our coverage universe is estimated to decline ~4%/2%
YoY/QoQ, led by positive operating leverage and favorable fuel prices. Average
imported petcoke price was down ~24%/9% YoY/QoQ in 3QFY25, while
domestic petcoke price was down 15%/6% YoY/QoQ. We estimate the average
variable cost/t to decline 5%/3% YoY/QoQ, while freight cost/t will remain flat
YoY (up 2% QoQ). We estimate other expenses/t to decline ~7%/8% YoY/QoQ.
Sanjeev Kumar Singh - Research analyst
(Sanjeev.Singh@MotilalOswal.com)
Research analyst - Mudit Agarwal
(Mudit.Agarwal@MotilalOswal.com)
Abhishek Sheth
(Abhishek.Sheth@MotilalOswal.com)
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
January 2023
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