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Cement
Potential result outperformers: UltraTech, India Cements
Potential result underperformers: Ambuja
Result Expectations – Key Highlights
Stable profits; demand weakness to offset tad better margins: For Apr-
Jun ’11 (1Q FY12), we expect sector EBITDA to be up 5% YoY and flat QoQ.
The YoY uptick will be primarily due to higher realizations (up 11% YoY). On
a QoQ basis, profits will be stable as price increases (+1-2% QoQ) will be
offset by higher costs (+2% QoQ). The sector’s overall EBITDA per ton is
forecast at ~Rs1000/ton, up 3-4% YoY & QoQ.
Mixed price trends in 1Q FY12; west & central witness weakness:
Cement prices on a pan-India basis averaged ~Rs263/bag in 1Q FY12
largely in line with 1Q levels. Prices were up QoQ in north & south India while
west and central India posted decline and east was stable QoQ.
Costs continue to rise: Input costs for the industry are likely up 13% YoY
led by higher coal prices esp. for linkage coal. On a QoQ basis, the impact of
higher coal prices will likely be moderated by lower overheads versus a yearend
push that is often seen in 4Q.
UltraTech, India Cements expected to outperform; Ambuja expected to
underperform: Among pure cement majors, companies like UltraTech and
India Cements with relatively large exposure to south India will likely post
both YoY & QoQ EBITDA growth as cement prices in south are up strongly
both YoY & QoQ. Ambuja, that has the highest volume exposure to west &
central India, is likely to be a relative underperformer.
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