Construction Materials share price target

Top Conviction Ideas - UltraTech Cement Ltd., JK Cement Ltd., Birla Corporation Ltd.

We interacted with cement dealers across regions in India to assess the demand and pricing scenario in Apr'25. Our discussions indicate that demand remained steady across most of the regions during the month. However, prices declined in certain markets due to extreme heatwaves affecting labor availability, which in turn weighed on demand. The ongoing marriage and...

EBITDA and PAT are expected to decline by 20.6% and 24.1% YoY, respectively, mainly due to margin contraction of 380bps YoY, largely because of inventory losses and volatility in PVC resin prices. Supreme Industries and Astral are expected to post moderate sales growth of +3.2% and +4.3% YoY, respectively, with volume growth in the Pipes & Fittings (P&F)...

volume growth and a slight uptick in pricing during the quarter. Demand remained firm across regions, led by private builders and IHB segment, supported by a growing real estate market, increased government-led infrastructure activities, and the lifting of GRAP-3 restrictions imposed earlier in NCR due to pollution. However, certain challenges impacted pricing and overall growth. Labor shortages due to regional festivals in Jan'25, an increase in non-trade sales, and a volume push by companies to meet year-end sales targets restricted the scope for price hikes. Additionally, intense competition...

Our Top Positive Plays: UltraTech Cement; JK Cement; JK Lakshmi Cement; Star Cement

strong in Mar'25 and has been on an upward trend since late Dec'24. However, prices declined in a few regions in Mar'25, primarily due to dealers pushing volumes to meet year-end targets. Among key markets, Ahmedabad, Bhopal and Hyderabad saw a price decline of Rs10/bag, while prices remained unchanged in Jaipur, Chennai and Mumbai. In contrast, Delhi, Patna, Kolkata and Lucknow witnessed a price hike of ~Rs10/bag. As a result, all-India average price remained largely flat MoM at Rs352/bag. Looking ahead, with...

Cement prices exhibited early signs of stabilization, following a subdued pricing environment through October and November 2024, driven by weak demand dynamics. However, a turnaround materialized in December, supported by rural housing expansion, and infrastructure-driven demand,
leading to a moderate recovery in prices.

Cement prices across India remained subdued through October and November 2024, reflecting weak demand conditions. However, a turnaround began in December, driven by government capital expenditure, rural housing growth, and infrastructure projects which helped stabilize prices.

Top Conviction Ideas - UltraTech Cement Ltd, JK Cements Ltd, Ambuja Cements Ltd

Prices to remain under pressure amid consolidation, capacity overhang and subdued government capex
• The cement sector's performance in H1FY25 was characterized by muted volume growth across the board, compounded by a consistent erosion in pricing power. This pricing pressure, driven by sector consolidation and competitive dynamics, saw realization and EBITDA per ton decline further.

Q3FY25 Earnings Preview - CEMENT

Cement prices continued to decline in Q2FY25, extending the downtrend observed over the past few quarters. The sequential drop in prices can be attributed to several factors, including prolonged monsoons, ongoing sector consolidation, and the traditionally weak seasonality of the quarter.

Top Conviction Ideas Cement: UltraTech Cement Ltd; JK Cements Ltd ; Ambuja Cements Ltd

The cement sector is gripped by falling prices, consolidation, and a fierce market share battle
In Q1FY25, the cement sector experienced moderate volume growth across our coverage, but the persistent decline in cement prices continued to erode both realization and EBITDA per ton.

In Q1FY25, the cement industry experienced subdued volume growth YoY and ongoing pressure on cement prices, resulting in lower realizations for cement companies.
Cement prices witnessed pressure in Q1FY25 due to general elections, heat waves, and industry consolidation.

The Q1FY25E top-line degrowth for the cement stocks under our coverage is expected to range from about 4.9% - 17.1% with SHREECEM expecting the least decline and RAMCOCEM with the largest drop QoQ.
Volumes are expected to remain flat YoY but are expected to decline QoQ due to weak seasonality.

Our top positive plays are: UltraTech Cement; Shree Cement; ACC Ltd; Birla Corporation; JK Cement; JK Lakshmi

The cement industry witnessed a jump in volumes which was partially offset by declining cement prices.
In terms of the decline in cement prices, the east region was hit the hardest, followed by the south region.