Cement: Yet another robust quarter in offing

By: |
April 13, 2021 2:45 AM

Consensus earnings are likely to be upgraded again; SRCM & UTCEM are top picks

Penna cement, IPO, initial public offeringPenna Cement operates integrated manufacturing facilities and grinding units across Andhra Pradesh, Telangana, and Maharashtra with an aggregate capacity of 10 MMTPA

After posting >40% y-o-y Ebitda growth in each of the past two quarters, cement companies in our coverage universe are likely to repeat the performance in Q4FY21 too. This would be led by 24% y-o-y volume growth with Ebitda/te rising 14% y-o-y (Rs 150/te) to Rs 1,218/te. We expect realisations to rise 0.6% q-o-q (`30/te) and 4% y-o-y (Rs 190/te). Similarly, total cost/te may remain broadly flat q-o-q, but up 1% y-o-y (Rs 40/te).

Key trigger to watch: seasonal price hikes in Apr’21 (already announced Rs 15/bag) given peak construction period and necessitated by cost escalations. Consensus earnings are yet again likely to be upgraded given better than expected volumes/prices. SRCM & UTCEM remain our top picks. We also like ACEM, JKCE and TRCL. Key risks: lower demand/prices, and any regulatory interventions.

Industry volumes expected to grow 20% y-o-y/15% q-o-q during Q4FY21e to 105mnte aided by the low base of Mar’20, with pan-India utilisation at ~85%. Adjusted for the base, industry growth is expected at 6-7% y-o-y. JKCE is likely to lead with >40% y-o-y volume growth while UTCEM/DALBHARA/ACEM /JKLC may see 24-30% y-o-y growth. ACC /SRCM/HEIM may report volume growth of ~20% y-o-y and TRCL/ICEM may see high single-digit y-o-y growth.

Average pan-India prices up 6% y-o-y during Q4FY21 led by 15% y-o-y rise in South and 10% y-o-y increase in West. Prices in North and Central regions are up 2-3% y-o-y while those in East are broadly flat y-o-y. On a q-o-q basis, average pan-India prices are likely up ~1% q-o-q led by 4% q-o-q increase in East and 2% in West. Realisations increase q-o-q is likely to be greater given higher (~3% q-o-q) price increases in non-trade segment, part of non-trade volumes shifting to trade segment, and better market mix change.

Average Ebitda/te may rise 14% y-o-y (Rs 150/te) and 1% q-o-q to Rs 1,218/te for our coverage universe. Overall cost/te may remain broadly flat q-o-q (up 1% y-o-y) as sharp ~Rs 150/te q-o-q increase in variable costs is likely to be offset by better operating leverage, lower maintenance costs, and cost efficiencies. Ebitda growth may be strong at ~70% y-o-y for TRCL and DALBHARA, and 40-50% y-o-y for UTCEM, JKCE, PRSMJ, and ORCMNT. Ebitda growth for ACEM, ACC and JKLC may come in at ~30% y-o-y. SRCM and TRCL are likely to lead with Ebitda/te of >`1,500/te. With improving VSF prices, standalone Ebitda for Grasim may more than double y-o-y to `8 bn on a low base.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, Check out latest IPO News, Best Performing IPOs, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Nirma Group cement company Nuvoco Vistas IPO opens Aug 9; check price band, IPO size, bid details
2How to value upcoming internet IPOs; ICICI Securities shares framework to filter quality internet cos
3Gold Price Today, 4 August 2021: Gold up as US dollar falls; may remain range bound; check trading strategy