Cement 􀂉 Demand trend continued to remain weak - 1QFY12 earnings preview -- CLSA

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Cement

􀂉 Demand trend continued to remain weak as we estimate a ~1% YoY rise in

industry dispatches during 1Q.

􀂉 Average cement prices during 1Q should be higher on a sequential basis even

while prices corrected sharply during Jun-11. On the whole, we estimate

realisations to be higher by 2-5% QoQ for our coverage.

􀂉 Despite higher realisations, we expect a moderate rise in Ebitda margins due

to higher costs, particularly energy costs; we note that 1Q would capture the

full impact of a 30% rise in linkage coal prices. On a YoY basis, like-to-like

Ebitda should be +/-10% YoY for the cement majors.

􀂉 We expect Grasim’s VSF business to report a 33% YoY rise in Ebitda on the

back of highest ever realisations. Reported numbers for UltraTech would not

be comparable due to cement business restructuring.