10 July 2011

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.

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