Construction Materials share price target

South Prices fell by 2% QoQ: Region witnessed steep price hikes of Rs1520/bag at the beginning of quarter. However, prices could not sustain and settled down with fall of Rs5/bag QoQ due to intense competition for higher market share in wake of better demand. Karnataka/Tamil Nadu witnessed...

While international coal prices increased 14% QoQ, petcoke price declined 11% QoQ. Average diesel costs are also lower 3% QoQ due to excise cuts. With average cement price increase of 2.1%, we expect EBITDA/t to stay flat QoQ at | 943/t. However, YoY we expect EBITDA/tonne to decline...

Cement - Q4FY22 Earnings Preview

International coal prices have seen a sharp uptick with South African coal doubling to $446 in just 10 days due to Russia-Ukraine crisis. Currently international coal prices are hovering at $370+/tonne, still up 106% from Q3FY22 exit rate and 4.2x higher on a YoY basis. Petcoke prices are also up over 100% YoY, 11% QoQ and currently hovering at ~$225/tonne. Although these steep rises in prices are unsustainable in the long run, these would put cement companies again on the back foot in terms of operating rates at least till the time the situation comes back to normalcy as power & fuel accounts for 27% of total costs. Since most cement companies have average two...

Companies under our coverage may see sharp ~20% YoY drop in EBITDA during Q3FY22E owing to lower volumes and sharp costs increases. Volumes may decline 4% YoY while EBITDA/te may shrink 17% YoY (Rs200/te) to ~Rs980/te as realisation rise of 7% YoY (Rs340/te) may fall short of the 14% YoY (Rs540/te) cost increase.

Our channel checks suggest likely sharp ~35% MoM demand rise (on low base) in Dec’21 which may imply low-single-digit YoY growth vs mid-single-digit YoY decline in Oct-Nov’21. Receding festive holidays / wedding season / monsoon, better availability of sand / labour, lower MoM prices of construction materials like steel, cement and sand, pick-up in infrastructure projects, improved release of funds and pent-up demand likely led to a sharp MoM uptick in volumes.

Our interaction with cement dealers across India suggests that average cement price at an all India level is down 1.5% MoM in Oct-21. Price decrease is seen across all the regions. In base case scenario we are modeling cement price increase in 2H as costs have increased sharply. Cost continues to move up with imported coal price up 45% MoM in Oct-21. Imported coal price is up 150% since March-21. Freight cost index is up 1% MoM in Sep-21 and its up 4% since March-21. Cement production in India for the month of Aug-21 has increased by 36.3% YoY at 28.5mt. Demand has been strong. In Q1FY22...

EBITDA/t to decline 19.9% QoQ on high cost, soft prices Average diesel prices are up ~17%, 9% YoY, QoQ, respectively, leading to rise in average freight costs per tonne by ~| 65-70/t QoQ. Also, petcoke and international coal prices inched up further by 15%, 58%, respectively, on a QoQ basis. With freight & power comprising over 50% of cost, we expect total production cost to increase by | 183/t QoQ to | 4,145/t (up 8.9% YoY, 4.6% QoQ). Hence, we expect EBITDA/t to decline 19.9% QoQ to...

Cement - Q2FY22 Earnings Preview - RESILIENT PERFORMANCE DESPITE COST HEADWINDS