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Sector Overview

* The weak demand for cement continues (production down 2.1%/ 0.02% YoY in October 2019-November 2019/April 2019-November 2019), due to the extended monsoon and lower construction activities. Demand may rise sequentially in Q4FY20, due to revival in construction activities after the monsoon, but is likely to be lower YoY in Q4FY20.

* Cement prices have continued to decline from the second half of May 2019. We believe average cement prices have declined by about 3% QoQ in Q3FY20. The western and eastern regions experienced a higher-than-India average decline, followed by the south and central regions, whereas the northern region experienced a fall of about 1% QoQ in cement prices. However, our channel checks suggest cement prices increased by `10-20/bag from January 6, 2020, and there is a possibility of one more price hike in the second half of January 2020.

* The DART universe is likely to report a 0.8% YoY volume decline and 2.5% QoQ realization fall, whereas revenue may grow marginally by 3.8% YoY. We expect Ambuja Cement to report the highest decline in cement volume by 2% YoY, whereas JK Cement should report a 3.3% YoY volume growth. ACC and Ambuja are likely to experience the highest 3% QoQ dip each in realization, whereas JK Cement is likely to report least a 1% QoQ decline in realization.

* The DART universe will potentially report an EBITDA growth of 15.3% YoY and 16.1% YoY growth in EBITDA/tn to `757. JK Lakshmi is likely to have the highest 58.7% YoY growth in EBITDA, whereas ACC’s should be the worst at -1.7% YoY.

* The DART universe is likely to report a PAT growth of 14.8% YoY.

Quarterly Estimates

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