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SAIL: Profit outlook restrained; maintain HOLD. Automobiles: Q2FY24 Review Cruising along. Cement: Q2FY24 Review Cost savings lift Q2 margins; volumes to bolster H2

Top Sector Ideas - Cement Q2FY24

EXIM data for the month of Aug’23 has been a mixed bag. Tile exports stood at 61.9 MSM, growing robustly by 59.3% YoY (+11.3% MoM) with GCC countries (~17%), Iraq (~7%) and USA (~6%) being the top export destinations. Tile exports for Apr–Aug’23 remained strong at 253 MSM (+36.8% YoY).EXIM: MDF imports strong; tile exports shine on

Cement - Q2FY24 Earnings Preview

India’s cement industry is increasingly becoming a battleground for firms with deep pockets. The Adani Group’s recent acquisition spree, including its purchase of Sanghi Cements for Rs 5,000 crore, has intensified competition, particularly in Western India.

Channel checks have yet again assumed huge importance given the surprise price surge in East India (announcement of INR 70/bag since the start of Sept’23). Our interaction with several sector experts and intermediaries across regions, over the past few days, point towards an improving cement price scenario.

The EXIM data for the month of Jul’23 has been a mixed bag. Tile exports stood at 55.6 MSM growing substantially by 41.5% YoY / 52.5% MoM with GCC countries (~17%), Iraq (~7%) and USA (~6%) being the top export destinations. Tile exports remain robust due to lower freight rates and a significant decline in gas costs. As per industry participants, tile exports are expected to remain healthy in the near term too.

As part of our channel checks, we interacted with a few senior marketing personnel – including an industry expert – in the southern states of Tamil Nadu and Kerala. Key takeaways are: 1) race for leadership position is driving up competitive intensity in the region; 2) Andhra players have been marginalised due to un-remunerative prices; 3) demand outlook remains positive on the back of infra push even as uncertainty looms over pricing.

Even as cement prices stand weak (since Q2FY23 till date), the street found solace in the plunging global fuel costs, hoping it will stay low and drive-up EBITDA margins. However, the recent rebound in global fuel rates (petcoke up 23% and thermal coal up 16% from the bottom of mid-July’23) could challenge the hypothesis (our savings expectations have been reduced from INR 350/te to INR 270/te).