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Cement
Potential Result Outperformers: UltraTech, India Cements
Potential Result Underperformers: Ambuja, Shree
Result Expectations – Key Highlights
Margins to drop QoQ, but stay better YoY: For Jul-Sep ’11 (2Q FY12), we
expect sector EBITDA to rise YoY helped primarily by south-India. Cement
prices in south India stayed flat QoQ implying 41% YoY price rise. This
contrasts with an average 8-13% QoQ price drop in most regions. On a pan-
India basis, cement prices fell ~7% QoQ but were up 8% YoY.
Volume growth recovers in 2Q but big regional disparities: For the
industry as a whole, cement demand in Jul-Aug ’11 grew ~9% YoY. Growth
was largely driven by north and west India that grew over 20% YoY. South
and east India remained weak with +/-3% volume growth. Volume growth for
sector majors in our coverage was ~6.8% YoY, tad lower than industry
Costs likely to be stable or lower: Recent downward bias in energy prices
has brought some respite to the inflation pressure on input costs. Our
industry feedback indicates partial pass-through of the 9% hike in
administered prices of diesel implemented in Jun ’11. A key upside risk is
potential seasonal spike in overheads during 2Q due to maintenance
shutdowns etc.
UltraTech, India Cements to outperform; Ambuja 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 YoY & stable QoQ.
Ambuja, that has high volume exposure to north & east India (regions with
steep QoQ price drops), is likely to be a relative underperformer.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement
Potential Result Outperformers: UltraTech, India Cements
Potential Result Underperformers: Ambuja, Shree
Result Expectations – Key Highlights
Margins to drop QoQ, but stay better YoY: For Jul-Sep ’11 (2Q FY12), we
expect sector EBITDA to rise YoY helped primarily by south-India. Cement
prices in south India stayed flat QoQ implying 41% YoY price rise. This
contrasts with an average 8-13% QoQ price drop in most regions. On a pan-
India basis, cement prices fell ~7% QoQ but were up 8% YoY.
Volume growth recovers in 2Q but big regional disparities: For the
industry as a whole, cement demand in Jul-Aug ’11 grew ~9% YoY. Growth
was largely driven by north and west India that grew over 20% YoY. South
and east India remained weak with +/-3% volume growth. Volume growth for
sector majors in our coverage was ~6.8% YoY, tad lower than industry
Costs likely to be stable or lower: Recent downward bias in energy prices
has brought some respite to the inflation pressure on input costs. Our
industry feedback indicates partial pass-through of the 9% hike in
administered prices of diesel implemented in Jun ’11. A key upside risk is
potential seasonal spike in overheads during 2Q due to maintenance
shutdowns etc.
UltraTech, India Cements to outperform; Ambuja 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 YoY & stable QoQ.
Ambuja, that has high volume exposure to north & east India (regions with
steep QoQ price drops), is likely to be a relative underperformer.
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