The build-up to an up-cycle
What has changed?
Industry’s capacity utilisation is visibly bottoming in FY13e: The change in our views is driven by visible bottoming of the industry’s capacity utilisation in FY13e and lower-than-expected capacity additions over FY14-15e. Updating for latest industry feedback, we estimate the industry’s effective capacity utilisation at 71% in FY14e (flat y-o-y) but tightening sharply in FY15e to 76% helped by demand acceleration. Compared to our earlier expectations, overcapacity is a tad higher in FY13e but capacity pipeline for FY14e is sharply lower. Installed capacity growth in FY14e is now estimated at 4% y-o-y versus 8% growth expected earlier.
Earnings up 30-60% due to improved margin outlook: We have lifted our FY14-15 Ebitda estimates for cement majors by about 25-50%, led by higher cement prices and better margins. Net profit estimates for majors are up 30-60% versus
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