India Cement Sector report by Anand Rathi

Visit http://indiaer.blogspot.com/ for complete details 􀂄 􀂄

India Cement Sector - 2QFY11 preview

n       Sep ’10 quarter preview. Revenues of cement companies during 2QFY11 are expected to decline 8% yoy, mainly owing to 12% decline in realisation. We expect decline in EBITDA margin by an average ~1,450bps yoy and net profit by 58% yoy.

n       Realisation to impact revenue growth. Cement companies’ revenue is likely to decline 8% yoy. Aggregate volume is estimated to rise 5% yoy, while average realization is likely to decline 12% yoy and 7% qoq. Stabilisation of new capacities and good monsoons led to lower volume growth and decline in cement prices.

n       EBITDA margin to decline yoy. We expect EBITDA margin to decline 1,450bps yoy, mainly due to lower realisation. All-India average cement prices are down 5% qoq and 8% yoy. Average industry utilisation level was 73% (compared with ~83% yoy and 81% qoq).

n       Profits to be 58% lower yoy. Aggregate net profit is estimated to decline 58% yoy (48% qoq), owing to 49% yoy dip in EBITDA and higher depreciation expenses.

n       Factors to watch. Updates on commissioning of fresh capacities and outlook on price would be key events to watch.