The cement companies in north and central part of the country may report lower fall in margins as against the ones in the south and east in Q2FY20, a report said.
The cement companies in north and central part of the country may report lower fall in margins as against the ones in the south and east in Q2FY20, a report said. So, UltraTech, ACC and JK Cement are the top bets for investors amid current scenario, Motilal Oswal said in a report. It comes on account of lower energy (petcoke and imported coal) costs, it added.”All- India cement prices have corrected 3% QoQ in 2QFY20, largely led by price decline of 5% QoQ in the East and 6% QoQ in the South. However, the decline was only to the extent of 1-2% for other regions,” it added. In the last three months, the cement firms have underperformed owing to worries about erosion of margins, the report noted.
The second quarter of fiscal year 2020 is expected to see 4-5 per cent lower realizations and flat volumes sequentially, Kotak Institutional Equities said in a report. “Lower fuel cost benefits should largely reflect in 3QFY20E; however, with the recent spike in crude prices, the cost relief could be short-lived. Weak fundamentals are catching up, we remain cautious on the sector,” it added.
Meanwhile, the cement demand growth is expected to halve to around 5 to 5.5 per cent this fiscal, impacted by weak government spending in the first half and liquidity crunch faced by the real estate market, a report by Crisil Research said. “Crisil expects cement demand growth to witness a mid-cycle slowdown to 5 to 5.5 per cent on-year this fiscal, down sharply from 12 per cent in fiscal 2019,” said Crisil Research. According to the report, the demand growth will “bear the brunt of weak government spending in the first half which contributes to nearly 35-40 per cent of cement demand and liquidity crunch impacting real estate market which consumes 5-8 per cement…”