Mutual Funds Commodities Research Tax Planning IPO Our Team Contact Us    
Google
Web www.equitybulls.com
Union Budget
Budget 2011-2012 Home
Industry Expectations - Budget 2011-2012
Industry Reactions - Budget 2011-2012
Budget 2010-2011
Budget 2010-2011 Home
Industry Expectations - Budget 2010-2011
Industry Reactions - Budget 2010-2011
Contributor's Corner
Bonanza Portfolio
Hemant K Gupta
Krish Bhatt
S A A R T H I
Trinity Investments
Exchange Information
BSE 2009 Holidays
NSE 2009 Holidays
Investor Guide
Depository & Dematerialisation
Grievance Redressal
Investor Guide
SEBI
Trading of Securities
Transfer of Securities
Your Rights
Budget 2009-2010
Budget 2009-2010 Home
Industry Expectations - Budget 2009-2010
Industry Reactions - Budget 2009-2010
Interim Budget 2009-2010 Home
Industry Expectations - Interim Budget 2009
Budget 2008-2009
Railway Budget 2008-2009
Industry Expectations - Budget 2008
Union Budget 2008-2009
Highlights of Budget 2008-2009
Summary of Budget 2008-2009
Industry Reactions - Budget 2008
IPOs
Current IPOs
Past IPOs
IPO Subscription
Mutual Funds
Gold Exchange Traded Fund
MF Unique Holding
Forthcoming Dividends
ELSS Schemes Comparison
Tax Plans
New Fund Offers
Research
Arbitrages
Equity
Market Whispers
Tax Planning
Home
Equity Linked Savings Scheme
Post Office MIS
9% GOI Senior Citizens Savings Scheme
8% Savings (Taxable) Bonds
Kisan Vikas Patra
National Savings Certificate
Public Provident Fund
Research

| More

Cement: Earnings weakness persists - Kotak Institutional Equities

Posted On: 2017-04-11 21:56:55

Earnings weakness persists. An adverse combination of weak volumes, muted prices and increasing costs will put pressure on earnings of cement companies. Save for a few regional names, we expect EBITDA decline of up to 15% yoy. Regional names will likely report better volume growth as they continue to gain market share on expanded capacity base. Rich valuations and continued earnings risk prevent us from taking a constructive stance on pan-India players.

All-India cement price down Rs8/bag qoq; demand weak in early 4QFY17 but improves in March

All-India cement prices were down by Rs8/bag qoq in 4QFY17, though regional disparities continued. As per our channel checks, prices were marginally up (Rs1/bag qoq) in north India while it declined in most other regions—price decline was more severe in the west (-Rs21/bag qoq) and south markets (-Rs11/bag) but moderate in central & east India (-Rs2 to 6/bag). In our coverage universe, we expect 2-4% qoq decline in realizations for pan-India names, flat or marginal increase qoq for north based names (Shree Cement, JK Cement and JK Lakshmi) and 1-3% decline for south based names. Orient Cement may report weak realizations (-5% qoq) due to the sharp pull back in prices in Maharashtra.

Volume trajectory at variance—regional names to gain share at expense of pan-India companies

We expect 2% yoy growth in cement volumes for our coverage universe. Cement volumes (per DIPP) declined by 14.5% in January-February 2017 though our checks indicate that demand accelerated in March 2017 to make good the weakness in the early part of the quarter. Weakness in volumes for the early part of the quarter reflects the after effects of demonetization as inventories increased in the distribution channels immediately post demonetization (November - December 2016) which also depressed sales in January - February 2017, besides lowering retail sales due to cash shortage, per our checks. We expect flat yoy volumes for pan-India names and moderate growth from regional players—mid-sized companies will continue to gain market share.

Costs will continue to trend higher led by pet-coke price increases

We expect sequential increase in costs due to higher pet-coke prices, as previous quarters partially benefitted from low priced carry over inventories. We highlight that while average pet-coke prices increased by 11% qoq in 3QFY17 (after 44% qoq increase in 2QFY17), low cost inventories (1-1.5 months of inventories depending on the company) had absorbed some of the cost impact in 3QFY17. Pet-coke prices again firmed up in March 2017 by 10-12% due to strengthening demand after some pricing weakness seen in February 2017.

Overall, we expect a weak quarter with 1-15% yoy EBITDA decline for pan-India names

We expect EBITDA for pan-India names to decline by 1-15% yoy led by increasing cost pressures (fuel)—decline will be more severe for ACC and Ambuja as they continue to lose market share. We expect Shree Cement's EBITDA to increase by 10% yoy despite increase in pet-coke costs, led by higher yoy realizations in north markets and better volumes. Among regional names, we expect EBITDA to decline by 1-5% yoy for JK Cement, JK Lakshmi, India Cements and Dalmia Bharat. We expect Orient Cement's EBITDA to decline by 14% yoy due to sharp decline in cement prices in the west during the quarter. We prefer mid cap names over large caps owing to more reasonable valuations. On an average, large cap cement stocks are trading at 15-18X EV/EBITDA on FY2018E earnings, while mid-cap stocks are trading at 8-11X EV/EBITDA.


Source: Equity Bulls

Click here to send ur comments or to feedback@equitybulls.com


Disclaimer:The article above is a gist / extract of the original report prepared by the research firm / brokerage firm. This article is not to be considered as an offer to sell or a solicitation to buy any securities. This article is meant for general information only. www.equitybulls.com, its employees or owners or the research firms, its employees or owners won't be responsible for any liability that may arise from information, errors or omissions in these articles. www.equitybulls.com or its employees or owners / the research firms or its employees or clients or owners may from time to time hold positions in securities referred in this article. For detailed research reports, please contact the concerned research firm directly.





Other Headlines:

Company Visit Note: The Mandhana Retail Ventures Ltd - NOT RATED - Kotak
Banks : Offers protection in adverse conditions - A deeper study into Pradhan Mantri Fasal Bima Yojana - Agriculture Insurance scheme - Kotak
Energy - downstream PSUs: When the tide turns - Kotak
Company Update: Mahindra and Mahindra (M&M) - BUY - TP Rs.1565 - Kotak
Maharashtra government removes cap on taxi / auto licenses: Angel Broking
IPCA Labs - USFDA update: Angel Broking
Company Update: Gujarat State Petronet Ltd (GSPL) - ACCUMULATE - TP Rs.182 - Kotak
Management Meet Update - Zensar Technologies - CSEC Research
Company Update: VRL Logistics Ltd - BUY - TP Rs.375 - Kotak
Strategy: The impossible trinity of farm income - Kotak
Banks : Private banks accelerate gains on CASA : Deeper study into deposit profile of banks for FY2016 - Kotak
Company Update: Blue Star - ACCUMULATE - TP Rs.684 - Kotak
Banking : RBI gets into action - Kotak
Dr Reddy's - EIR for its Miryalaguda API plant: Angel Broking
Eris Lifesciences Limited - IPO Note - Angel Broking
Banks: Maharashtra announces farm loan waiver - Kotak
Company Update: Petronet LNG - ACCUMULATE - TP Rs.462 - Kotak
Company Update: Mirza International - REDUCE - TP Rs.161 - Kotak
Fiem Industries - BUY - TP Rs.1,254 - Kotak
Insurance: ICICI Prudential Life boosts industry growth - Kotak
Tejas Networks - A destination for high speed technology: Angel Broking
Hindalo Industries - Result Update - Strong show becoming a routine, maintain Buy - Centrum
Star Cement - Result Update - Profitability rebounds on better pricing, cost reduction - Centrum
FIEM Industries - Result Update - Negatives priced in, Well poised to gain in the long term - Centrum
Birla Corporation - Strong Q4 FY17; acquisition reporting strong numbers; Buy - Anand Rathi
Escorts Ltd - Ready for next leg - PhillipCapital
Earnings Update - Talwalkars Better Value Fitness (TBVF IN) - Results on expected line - CSEC Research
Result Update: Adani Port and Special Economic Zone (APZ) - BUY - TP Rs.425 - Kotak
Telecom: Two quarters of Jio - assessing the impact - Kotak
Earnings Update - Balkrishna Industries (BIL IN) - Strong volume growth continues - CSEC Research
Earnings Update - Kaveri Seeds Ltd(KSCL IN) - Muted performance - CSEC Research
Earnings Update - TTK Prestige (TTKPT IN) - Results in-line with expectation - CSEC Research
Earnings Update - Berger Paints (BRGR IN) - Results in-line with expectation - CSEC Research
Mayur Uniquoters - Footwear segment dragged performance; Maintain Hold - Awanish Chandra and Vikas Rajpal - Centrum
Ramco Cements - On solid footing; reiterate Buy - Rajesh Kumar Ravi and Vinay Menon - Centrum
Cadila gets US FDA approval for Mesalamine tablets: Angel Broking
Consumer Products: 4QFY17 review: better, but not quite there yet - Kotak
Earnings Update - MAHINDRA & MAHINDRA (MM IN) - Healthy performance led by FES - CSEC Research
Earnings Update -ITC (ITC IN) - Decent performance - CSEC Research
Earnings Update - Heidelberg Cements (HEIM IN) - Strong volumes; drive the earnings growth - CSEC Research
Cement: Cooling off - Kotak
Cadila Healthcare - 4QFY2017 Result Update - Angel Broking
Result Update: Moil - BUY - TP Rs.410 - Kotak
Result Update: Time Technoplast Ltd (TTL) - BUY - TP Rs.178 - Kotak
Earnings Update - Adani ports & SEZ (ADSEZ IN) - Healthy volume growth - CSEC Research
Pharma Update - Worst phase possibly behind us: Angel Broking
Result Update: Mold-Tek Packaging - ACCUMULATE - TP Rs.304 - Kotak
Result Update: IL&FS Transportation Networks Ltd - ACCUMULATE - TP Rs.112 - Kotak
Result Update: IRB INFRASTRUCTURE DEVELOPERS LTD - BUY - TP Rs.295 - Kotak
Mixed signals from May Auto sales volumes: Angel Broking


Website Created & Maintained by : Chennai Scripts
West Mambalam, Chennai - 600 033,
Tamil Nadu, India

disclaimer copyright © 2005 - 2017