Construction Materials share price target

Our channel checks suggest cement industry volumes in Nov’22 may have witnessed
~30% YoY growth (on low base owing to the festive season in Nov’21) and excessive rainfall in south India.

Tile companies under our coverage – Kajaria Ceramics (KJC) and Somany Ceramics
(SOMC) – reported in-line revenue growth of 9.4%-10.4% YoY (3-year CAGR of 13.6-
13.8%) and flat volume growth YoY (3-year CAGR of ~8% each) on a high base in Q2FY23, aided by higher realisations.

Our channel checks suggest industry volumes in Oct’22 may have seen a low double-
digit decline YoY largely due to high base as the festive season was spread over October and November last year.

Building material companies under our coverage universe are expected to report tepid
revenue growth in Q2FY23E on high base YoY (pent-up demand YoY due to Q1FY22 being impacted by the resurgence of pandemic).

Cement companies under our coverage may see ~35% YoY decline in EBITDA during Q2FY23E, higher than the past two quarters, owing to sharp cost increases.

For the cement sector, the September quarter usually remains weak as construction activities tend to slow down during the monsoon season.

Cement - Q2FY23 Earnings Preview

Our channel checks suggest industry volumes in Sep’22 may report high single digit
MoM growth owing to lower prices of steel and cement, lower rainfall (vs normal) in
high-density areas of UP, Bihar and WB.