Construction Materials share price target

EBITDA/t to broadly stay flat QoQ despite high cost pressure Average diesel prices are up ~28% YoY, 6% QoQ leading to rise in average freight costs per tonne by ~| 50-52/t QoQ. Also, petcoke, coal prices inched up further by 12%, 19%, respectively, QoQ. With freight & power comprising over 50% of cost, we expect total production cost to increase by | 110/t QoQ to | 3946/t (up 2.7% YoY, 2.8% QoQ). However, with improved prices and controlled overheads, we expect EBITDA/t to remain...

TOP RESULT PICK: Dalmia Bharat, JK Lakshmi,ACC and JK Cement

contraction in margins, we believe that sector will sustain margins at elevated levels in FY22 on back of price hikes. We continue to like Ambuja cement (ACEM), Dalmia Bharat (DALBHARA) and JK Lakshmi cement (JKLC) on back of attractive valuations and strong earnings growth. Price hikes in Q1 offsets higher costs: Cement prices increased by Rs22/bag...

contraction in margins, we believe that sector will sustain margins at elevated levels in FY22 on back of price hikes. We continue to like Ambuja cement (ACEM), Dalmia Bharat (DALBHARA) and JK Lakshmi cement (JKLC) on back of attractive valuations and strong earnings growth. Price hikes in Q1 offsets higher costs: Cement prices increased by Rs22/bag...

Central unchanged except w estern UP w here (Rs/bag) prices increased by Rs3-7/bag. Prices in MP also w ere unchanged MoM. In line w ith North, prices are expected to...

Our interaction with cement dealers across India suggest that an average cement price has increased by 1% MoM in June-21 and thus Q1FY22 average cement price is up 6% QoQ. Cost has moved up too with imported coal is up 14% QoQ and freight index is up 4% QoQ in Q1FY22. On demand front, we are modeling in cement demand in Q1FY22 to be lower by 25% versus Q4FY21. But despite lower volume, EBITDA/t is expected to improve on QoQ in Q1FY22 (exhibit 12). This will be driven by higher realization. Historically realization has been strong until monsoon and then it starts receding. We are expecting softness in realization going...

Our interaction with cement dealers across India suggest that an average cement price has increased by 2% MoM in May 21. This is 4th consecutive month of, MoM price hike by the industry. Over the last 4 months, price hike in East is highest followed up by the South region (Fig 1-6). Cost has moved up too, in May-21 imported coal price (adjusted for exchange rate) is up 2% MoM. On demand front, PIB release suggest India cement production increased by strong 33% YoY (supported by low base) but we note the absolute cement volume was still lower in Mar-21 versus Mar-19. On cement demand for April/May-21, our interaction...

Our channel check suggests, average cement price at an all India level is up 2% MoM in Apr-2021. Region wise, price increase is seen in East/West at 6%/ 5% MoM, North/South at 1% MoM and Central at flat MoM. Cost has moved up too, in Apr-21 imported coal price (adjusted for exchange rate) is up 5% MoM (3% from imported coal and 2% from INR depreciation). Energy prices have been moving up, as on April 21 imported coal price (adjusted for exchange rate) is up 7% vs average of Q4FY21. On demand front, all India cement production in Feb-21 has decreased by 6% YoY. However, in our dealer interaction for this month we gathered Cement...

Cement demand witnessed double digit growth during the quarter driven by strong demand from non trade segment and well supported by trade segment Insiitutional demand was particularly strong on the back of good traction from govt projects and infra related activities.

demand. Cement prices in East increased by Rs100/t QoQ, as it reached unsustainable levels in last quarter. Western region's prices witnessed increase of Rs40/t on back of stable prices in Gujarat and sharp increases in Maharashtra. Prices remained stable in South due to increase in AP, Tamil Nadu and Telangana,...