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:

Result Update: KPIT Technologies Ltd - SELL - TP Rs.121 - Kotak
Result Update: Hindustan Zinc Ltd - REDUCE - TP Rs.285 - Kotak
Result Update: Kansai Nerolac Paints Ltd - BUY - TP Rs.515 - Kotak
Company Update: Gujarat State Petronet Ltd - ACCUMULATE - TP Rs.182 - Kotak
Company Update: Allcargo Logistics Ltd. - BUY - TP Rs.205 - Kotak
Banks : Where is capital consumption in public banks? : Deep dive into capital consumption and requirements - Kotak
The Pitch Report - Result Update: Karnataka Bank Ltd - BUY - TP Rs.220 - Kotak
Chhota (to) MOTA ideas: Venky's (india) Ltd - REDUCE - TP Rs.2200 - Kotak
Bajaj Corp - GST impacts reported results; Retail growth encouraging though - JM Financial
Hatsun Agro Ltd - Result Update - Q1FY18 - KR Choksey
Views on Infosys Limited 1QFY2018 Results: Angel Broking
The Pitch Report: Sutlej Textiles - BUY - TP Rs.1220 - Kotak
Result Update : Cyient Ltd (Cyient) - REDUCE - TP Rs.521 - Kotak
Company Visit Note : Shankara Building Products Ltd - Kotak
Views on Tata Consultancy Services Limited 1QFY2018 Results: Angel Broking
Economy: Inflation comfort to prompt a rate cut - Kotak
Petroleum consumption grows 0.4% in June after growing 3-5% in April and May
Energy-petroleum consumption: Slow and unsteady - Kotak
Metals & Mining (Attractive): 1QFY18-a tad weak due to lower prices, one-offs - Kotak
HPCL may finally become an arm of upstream ONGC: Angel Broking
Economy: FX outlook: No radical turning of tide - Kotak
Company Visit Note: Rajoo Engineers Ltd (REL) - NOT RATED - Kotak
Infrastructure: LPG - at the forefront of growth - Kotak
Banks : Marginal improvement - Annual report analysis on NPLs, restructured loans and others - Kotak
Energy: 1QFY18E preview-weak for OMCs and RIL; strong for CGDs - Kotak
Company Visit Note: Ion Exchange Ltd - NOT RATED - Kotak
L&T Finance Holdings Ltd - Prudent downsizing for attractive business revival: Angel Broking
Sector Update: INNERWEAR SECTOR REPORT - Kotak
Syngene International - Setting the stage for capacity driven growth: Angel Broking
Management Meet Update: Bhansali Engineering Polymers Ltd - NOT RATED - Kotak
Company Update: Gujarat Pipavav Port Ltd - BUY - TP Rs.180 - Kotak
Lupin - Launches MoxiFloxacin HCL Opthalmic Solution in US: Angel Broking
Tepid growth as buyers delay purchase decision ahead of GST - CSEC Research
Auto Industry Volume Update: June 2017 - Kotak
Automobile June Sales subdued, GST led price cuts to benefit the sector: Angel Broking
Technology: 1QFY18E Preview - Kotak
Banks : Retail loan growth: the only game in town - Kotak
GST: A Khatta-Meetha blend to drive long term economic growth: Angel Broking
Views On GST Roll Out - Zerodha
Company Update: Blue Dart Express (BDE) - BUY - TP Rs.5150 - Kotak
Metals & Mining (Attractive): Aluminum pricing - the bull and the bear of it - Kotak
Technology: Another tough year for Indian IT - Kotak
CHHOTA (to) MOTA ideas: Venky's (India) Ltd - BUY - TP Rs.2150 - Kotak
Company Update: CG Power and Industrial Solution Ltd (CG) - ACCUMULATE - TP Rs.84 - Kotak
Supreme Industries - Visit Note - Plastic Industry Juggernaut - Nirmal Bang
Crompton Greaves Consumer Electricals - Initiating Coverage - Rechristened For An Electrifying Future - Nirmal Bang
AU Small Finance Bank - IPO Update - Unique Positioning - Nirmal Bang
AU Small Finance Bank Ltd - IPO Note - Angel Broking
Company Visit Note: Maithan Alloys Ltd. (MAL) - NOT RATED - Kotak
Economy/Strategy: GST: Godot has arrived - Kotak


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

disclaimer copyright © 2005 - 2017