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Cement
Volume remains subdued in Q1FY12, ~1% YoY (decline ~8%
QoQ)
All-India cement dispatches remained sluggish during Q1FY12 and
are expected to increase marginally ~1% YoY (decline ~7% QoQ).
Volume growth for our coverage universe is expected to decline
~8% QoQ. Cement demand remained muted due to slowdown in
construction activities both in housing and infrastructure segments.
Cement prices decline ~| 4/bag QoQ during Q1FY12
Prices came under pressure during Q1FY12 as cement demand
slackened after March 2011. Prices started correcting after mid-May
2011 after it showed good momentum in Q4FY11 and touched alltime
highs in March 2011. All-India average prices declined by |
4/bag QoQ to | 257/bag in Q1FY12. The correction was primarily
due to pricing weakness in the northern & central markets. Average
retail prices in the northern & central region declined ~| 6/bag QoQ
to | 257/bag and | 245/bag, respectively. Average price in the
western region stood at | 255/bag declining by ~| 3/bag QoQ.
Though prices in Gujarat (Ahmedabad and Surat) declined by | 7-
8/bag QoQ, Maharashtra (Mumbai and Pune) saw firm pricing. In the
southern region, prices remained strong led by maintaining pricing
discipline while average price stood at | 272/bag.
Increase in domestic coal prices to reflect in Q1FY12E
Coal India increased linkage coal prices by 30% for grades C to G
and by ~173-187% for grades A & B by implementing a differential
pricing methodology. Though the hike was effective from February
27, 2011, the impact was not seen in Q4FY11 as companies had low
cost coal inventory. Major impact of fuel cost increase will be seen
in Q1FY12 with companies like ACC, Ambuja, Mangalam Cement
and Heidelberg seeing a substantial increase in cost of production
as they procure large amount of domestic linkage coal.
Operating margin of cement universe to decline by ~270 bps QoQ
Net sales of our cement coverage universe (excluding UltraTech; as
its result will not be comparable YoY due to Samruddhi merger) is
expected to increase ~8% YoY while it is expected to decline by
~8% QoQ. The EBITDA margin of the universe is expected to
decline ~490 bps YoY (~270 bps QoQ) to 20%. Our coverage
bottomline is expected to decline ~35% YoY (~36% QoQ).
Company specific view
Company Remarks
ACC We expect the sales volume to increase ~12% YoY (decline ~5% QoQ) to 5.9 MT
in Q2CY11. We estimate net realisation will improve marginally by | 50/tonne QoQ
to | 3,899/tonne. EBITDA is expected to decline ~17% QoQ (~30% YoY) to |
739/tonne due to increase in costs, mainly power & fuel cost due to increase in
domestic coal prices
Ambuja
Cement
Sales volume is expected to remain almost flat YoY (decline ~6% QoQ) to 5.32 MT
in Q2CY11. We expect realisation to decline ~2% QoQ to | 3829/tonne due to price
correction in western and northern markets. EBITDA is expected to decline ~26%
YoY (~22% QoQ) to | 838/tonne due to an increase in fuel cost and other
expenditure
UltraTech
Cement
The blended sales volume is expected to remain flat YoY (decline ~11% QoQ) in
Q1FY12 at 10.23 MT (including Samruddhi volume in Q1FY11). Blended realisation
is expected to improve ~3% QoQ to | 4004/tonne on the back of firm prices in
Southern markets. Blended EBITDA is expected to decline ~11% QoQ to |
786/tonne
Shree
Cement
We expect cement sales volumes to increase ~4% YoY (decline ~12% QoQ) to
2.52 MT in Q1FY12. Cement realisations are expected to decline ~2% QoQ to |
3229/tonne. We estimate merchant power sales volume of ~458 million units at
realisation of | 4.5 per unit. Cement EBITDA is expected to decline ~31% YoY
(~16% QoQ) to | 709/tonne
India Cement Sales volume is expected to decline ~4% YoY (flat QoQ) to 2.54 MT in Q1FY12.
Cement realisation is expected to improve ~3% QoQ to | 3909/tonne due to strong
pricing discipline in the southern region. We estimate EBITDA will improve ~17%
QoQ to | 820/tonne
JK Cement Blended sales volume (grey & white) is expected to increase 7% YoY (decline
~13% QoQ) to 1.43 MT in Q1FY12. The blended realisation is expected to decline
~3% QoQ to | 3930/tonne. EBITDA is expected to decline ~11% QoQ (~6% YoY)
to | 625 per tonne
JK Lakshmi
Cement
The sales volume is expected to increase ~11% YoY to 1.13 MT while it is
expected to decline ~10% QoQ. The realisation is expected to decline ~5% QoQ to
| 3148/tonne. EBITDA is expected to decline ~12% YoY (~19% QoQ) to |
483/tonne
Heidelberg
Cement
We expect the sales volume to remain almost flat YoY (decline ~12% QoQ to 0.72
MT in Q2CY11. We expect the realisation to decline ~3% QoQ (~4% YoY) to |
3,203/tonne. EBITDA is expected to decline ~63% YoY (~59% QoQ) to | 203/tonne
due to an increase in fuel cost due to coal price hikes
Orient Paper Cement sales volume is expected to decline ~13% YoY (~9% QoQ) to 0.90 MT.
However, due to pricing discipline, cement realisation is likely to improve ~24%
YoY (~2% QoQ) to | 3435/tonne. Cement EBIT is expected to surge ~33% YoY
(~1% YoY) to | 999/tonne. We expect EBIT margins for the fan and paper
segments at 2% and 12%, respectively, as against -10% and ~12% in Q4FY11
Birla Corp Sales volume is expected to decline ~5% QoQ (flat YoY) to 1.49 MT. The realisation
is expected to decline ~2% QoQ (~8% YoY) to | 3243/tonne. Blended EBITDA is
expected to decline ~58% YoY (~3% QoQ) to | 419/tonne on account of a rise in
domestic coal prices and depressed realisations
Mangalam
Cement
Sales volume is expected to decline ~22% YoY (~19% QoQ) to 0.33 MT in Q1FY12.
We expect realisations to decline ~3% QoQ to | 3143 per tonne. The EBITDA is
expected to decline significantly by ~41% YoY (~28% QoQ) to | 417/tonne on
account of higher power & fuel cost
Source: Company, ICICIdirect.com Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Cement
Volume remains subdued in Q1FY12, ~1% YoY (decline ~8%
QoQ)
All-India cement dispatches remained sluggish during Q1FY12 and
are expected to increase marginally ~1% YoY (decline ~7% QoQ).
Volume growth for our coverage universe is expected to decline
~8% QoQ. Cement demand remained muted due to slowdown in
construction activities both in housing and infrastructure segments.
Cement prices decline ~| 4/bag QoQ during Q1FY12
Prices came under pressure during Q1FY12 as cement demand
slackened after March 2011. Prices started correcting after mid-May
2011 after it showed good momentum in Q4FY11 and touched alltime
highs in March 2011. All-India average prices declined by |
4/bag QoQ to | 257/bag in Q1FY12. The correction was primarily
due to pricing weakness in the northern & central markets. Average
retail prices in the northern & central region declined ~| 6/bag QoQ
to | 257/bag and | 245/bag, respectively. Average price in the
western region stood at | 255/bag declining by ~| 3/bag QoQ.
Though prices in Gujarat (Ahmedabad and Surat) declined by | 7-
8/bag QoQ, Maharashtra (Mumbai and Pune) saw firm pricing. In the
southern region, prices remained strong led by maintaining pricing
discipline while average price stood at | 272/bag.
Increase in domestic coal prices to reflect in Q1FY12E
Coal India increased linkage coal prices by 30% for grades C to G
and by ~173-187% for grades A & B by implementing a differential
pricing methodology. Though the hike was effective from February
27, 2011, the impact was not seen in Q4FY11 as companies had low
cost coal inventory. Major impact of fuel cost increase will be seen
in Q1FY12 with companies like ACC, Ambuja, Mangalam Cement
and Heidelberg seeing a substantial increase in cost of production
as they procure large amount of domestic linkage coal.
Operating margin of cement universe to decline by ~270 bps QoQ
Net sales of our cement coverage universe (excluding UltraTech; as
its result will not be comparable YoY due to Samruddhi merger) is
expected to increase ~8% YoY while it is expected to decline by
~8% QoQ. The EBITDA margin of the universe is expected to
decline ~490 bps YoY (~270 bps QoQ) to 20%. Our coverage
bottomline is expected to decline ~35% YoY (~36% QoQ).
Company specific view
Company Remarks
ACC We expect the sales volume to increase ~12% YoY (decline ~5% QoQ) to 5.9 MT
in Q2CY11. We estimate net realisation will improve marginally by | 50/tonne QoQ
to | 3,899/tonne. EBITDA is expected to decline ~17% QoQ (~30% YoY) to |
739/tonne due to increase in costs, mainly power & fuel cost due to increase in
domestic coal prices
Ambuja
Cement
Sales volume is expected to remain almost flat YoY (decline ~6% QoQ) to 5.32 MT
in Q2CY11. We expect realisation to decline ~2% QoQ to | 3829/tonne due to price
correction in western and northern markets. EBITDA is expected to decline ~26%
YoY (~22% QoQ) to | 838/tonne due to an increase in fuel cost and other
expenditure
UltraTech
Cement
The blended sales volume is expected to remain flat YoY (decline ~11% QoQ) in
Q1FY12 at 10.23 MT (including Samruddhi volume in Q1FY11). Blended realisation
is expected to improve ~3% QoQ to | 4004/tonne on the back of firm prices in
Southern markets. Blended EBITDA is expected to decline ~11% QoQ to |
786/tonne
Shree
Cement
We expect cement sales volumes to increase ~4% YoY (decline ~12% QoQ) to
2.52 MT in Q1FY12. Cement realisations are expected to decline ~2% QoQ to |
3229/tonne. We estimate merchant power sales volume of ~458 million units at
realisation of | 4.5 per unit. Cement EBITDA is expected to decline ~31% YoY
(~16% QoQ) to | 709/tonne
India Cement Sales volume is expected to decline ~4% YoY (flat QoQ) to 2.54 MT in Q1FY12.
Cement realisation is expected to improve ~3% QoQ to | 3909/tonne due to strong
pricing discipline in the southern region. We estimate EBITDA will improve ~17%
QoQ to | 820/tonne
JK Cement Blended sales volume (grey & white) is expected to increase 7% YoY (decline
~13% QoQ) to 1.43 MT in Q1FY12. The blended realisation is expected to decline
~3% QoQ to | 3930/tonne. EBITDA is expected to decline ~11% QoQ (~6% YoY)
to | 625 per tonne
JK Lakshmi
Cement
The sales volume is expected to increase ~11% YoY to 1.13 MT while it is
expected to decline ~10% QoQ. The realisation is expected to decline ~5% QoQ to
| 3148/tonne. EBITDA is expected to decline ~12% YoY (~19% QoQ) to |
483/tonne
Heidelberg
Cement
We expect the sales volume to remain almost flat YoY (decline ~12% QoQ to 0.72
MT in Q2CY11. We expect the realisation to decline ~3% QoQ (~4% YoY) to |
3,203/tonne. EBITDA is expected to decline ~63% YoY (~59% QoQ) to | 203/tonne
due to an increase in fuel cost due to coal price hikes
Orient Paper Cement sales volume is expected to decline ~13% YoY (~9% QoQ) to 0.90 MT.
However, due to pricing discipline, cement realisation is likely to improve ~24%
YoY (~2% QoQ) to | 3435/tonne. Cement EBIT is expected to surge ~33% YoY
(~1% YoY) to | 999/tonne. We expect EBIT margins for the fan and paper
segments at 2% and 12%, respectively, as against -10% and ~12% in Q4FY11
Birla Corp Sales volume is expected to decline ~5% QoQ (flat YoY) to 1.49 MT. The realisation
is expected to decline ~2% QoQ (~8% YoY) to | 3243/tonne. Blended EBITDA is
expected to decline ~58% YoY (~3% QoQ) to | 419/tonne on account of a rise in
domestic coal prices and depressed realisations
Mangalam
Cement
Sales volume is expected to decline ~22% YoY (~19% QoQ) to 0.33 MT in Q1FY12.
We expect realisations to decline ~3% QoQ to | 3143 per tonne. The EBITDA is
expected to decline significantly by ~41% YoY (~28% QoQ) to | 417/tonne on
account of higher power & fuel cost
Source: Company, ICICIdirect.com Research
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