IGI Logo

Yet another strong quarter; upgrades to continue

After posting >40% YoY EBITDA growth in each of the past two quarters, cement companies in our coverage universe are likely to repeat the performance in Q4FY21 too. This would be led by 24% YoY volume growth with EBITDA/te rising 14% YoY (Rs150/te) to Rs1,218/te. We expect realisations to rise 0.6% QoQ (Rs30/te) and 4% YoY (Rs190/te). Similarly, total cost/te may remain broadly flat QoQ, but up 1% YoY (Rs40/te). Key trigger to watch: seasonal price hikes in Apr’21 (already announced Rs15/bag) given peak construction period and necessitated by cost escalations. Consensus earnings are yet again likely to be upgraded given better than expected volumes / prices. SRCM & UTCEM remain our top picks. We also like ACEM, JKCE and TRCL. Key risks: lower demand / prices, and any regulatory interventions.

* Industry volumes expected to grow 20% YoY / 15% QoQ during Q4FY21E to 105mnte (our estimate) aided by the low base of Mar’20, with pan-India utilisation at ~85%. Adjusted for the base, industry growth is expected at 6-7% YoY. JKCE is likely to lead with >40% YoY volume growth while UTCEM / DALBHARA / ACEM / JKLC may see 24-30% YoY growth. ACC / SRCM / HEIM may report volume growth of ~20% YoY and TRCL / ICEM may see high single-digit YoY growth.

* Average pan-India prices up 6% YoY during Q4FY21 led by 15% YoY rise in South and 10% YoY increase in West. Prices in North and Central regions are up 2-3% YoY while those in East are broadly flat YoY. On a QoQ basis, average pan-India prices are likely up ~1% QoQ led by 4% QoQ increase in East and 2% in West partly offset by ~1% QoQ drop in North and South regions. Realisations increase QoQ is likely to be greater given higher (~3% QoQ) price increases in non-trade segment, part of nontrade volumes shifting to trade segment, and better market mix change.

* Average EBITDA/te may rise 14% YoY (Rs150/te) and 1% QoQ to Rs1,218/te for our coverage universe. Overall cost/te may remain broadly flat QoQ (up 1% YoY) as sharp ~Rs150/te QoQ increase in variable costs (fuel, diesel, slag, packing materials, etc.) is likely to be offset by better operating leverage, lower maintenance costs, and cost efficiencies. EBITDA growth may be strong at ~70% YoY for TRCL and DALBHARA, and 40-50% YoY for UTCEM, JKCE, PRSMJ, and ORCMNT. EBITDA growth for ACEM, ACC and JKLC may come in at ~30% YoY. SRCM and TRCL are likely to lead with EBITDA/te of >Rs1,500/te while UTCEM and JKCE may report blended EBITDA/te of ~Rs1,300/te. With improving VSF prices, standalone EBITDA for Grasim may more than double YoY to Rs8bn on a low base.

To Read Complete Report & Disclaimer Click Here

For More ICICI Securities Disclaimer https://www.icicisecurities.com/AboutUs.aspx?About=7

Above views are of the author and not of the website kindly read disclaimer