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Grasim reported consolidated EBITDA of Rs10.3bn vs JPMe at Rs9.7bn
and well ahead of the consensus estimates at Rs8.6bn. While UTCEM
results were inline with expectations, standalone EBITDA came in at
Rs3.4bn vs JPMe at Rs2.96bn and consensus at Rs2.6bn primarily driven
by the better than expected VSF sales volume. Consol PAT in the quarter
was Rs4.2bn below JPMe of Rs5.2bn due to lower other income and
higher tax rate.
Weak VSF prices showing signs of improvement: VSF sales volume
improved 44% q/q (last quarter volumes were impacted by production
shutdown) and was better than expected (~79kt vs. JPMe 72kt). Average
VSF realizations were inline with our expectation declining 18% q/q but
management have highlighted that global VSF prices have shown
marginal improvement in the 2Q. This should help recovery in
realization in 3QFY12. Margin declined sharply with lower ASP to
28.5% (vs. 38.8% in 1QFY12). Demand in the near term is expected to
be “volatile due to macro economic conditions and Euro Zone
uncertainties”.
Cement environment remains tough: Management expects 2HFY12
demand growth of ~7-8% (which given the low base should not be
difficult) and medium to long term growth of 8-9%. As per the company
the current surplus scenario should subside gradually in next 2-3 years.
The increasing energy costs (imported and domestic coal prices have
increased sharply over the last year) have been highlighted as a cause of
concern.
Capex update: Grasim reduced the cement capex guidance for FY12
from Rs51.4bn in the 1Q (which was reduced from Rs53.7bn guidance)
to Rs47.1bn and has spent ~Rs11.3bn in the 1HFY12. The tough market
condition and the delay in recovery of cement demand is likely slowing
capex in projects, in our view.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Grasim reported consolidated EBITDA of Rs10.3bn vs JPMe at Rs9.7bn
and well ahead of the consensus estimates at Rs8.6bn. While UTCEM
results were inline with expectations, standalone EBITDA came in at
Rs3.4bn vs JPMe at Rs2.96bn and consensus at Rs2.6bn primarily driven
by the better than expected VSF sales volume. Consol PAT in the quarter
was Rs4.2bn below JPMe of Rs5.2bn due to lower other income and
higher tax rate.
Weak VSF prices showing signs of improvement: VSF sales volume
improved 44% q/q (last quarter volumes were impacted by production
shutdown) and was better than expected (~79kt vs. JPMe 72kt). Average
VSF realizations were inline with our expectation declining 18% q/q but
management have highlighted that global VSF prices have shown
marginal improvement in the 2Q. This should help recovery in
realization in 3QFY12. Margin declined sharply with lower ASP to
28.5% (vs. 38.8% in 1QFY12). Demand in the near term is expected to
be “volatile due to macro economic conditions and Euro Zone
uncertainties”.
Cement environment remains tough: Management expects 2HFY12
demand growth of ~7-8% (which given the low base should not be
difficult) and medium to long term growth of 8-9%. As per the company
the current surplus scenario should subside gradually in next 2-3 years.
The increasing energy costs (imported and domestic coal prices have
increased sharply over the last year) have been highlighted as a cause of
concern.
Capex update: Grasim reduced the cement capex guidance for FY12
from Rs51.4bn in the 1Q (which was reduced from Rs53.7bn guidance)
to Rs47.1bn and has spent ~Rs11.3bn in the 1HFY12. The tough market
condition and the delay in recovery of cement demand is likely slowing
capex in projects, in our view.
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