Pent-up demand and lower base effect are expected to aid sales volumes QoQ and YoY. However, the recovery would not be strong enough in many regions due to ongoing monsoons. In terms of sales mix, non-trade demand is likely to remain healthy YoY as various central government infra projects gathered strong momentum while trade sales are expected to remain weak owing to heavy rains in most of the country. In terms of regions, demand in the eastern region may remain soft due to flooding in some parts as well as sand availability issue on account of restrictions on mining during monsoons while south region would likely see better volume growth on a low base effect. In terms of prices, we expect September 2021 quarter to close with average price decline of 1.8% QoQ led by monsoon led weak retail demand. Further, higher petcoke, international coal, diesel prices of ~15%, 58%, 9% QoQ, respectively to escalate cost by Rs. 183/t (or 4.6% QoQ) in Q1FY22. This would lead to 482 bps QoQ drop in margins to 21.8%. Overall, for Q2FY22E, our I-direct cement coverage universe is expected to report sales volume & EBITDA de-growth of 0.6%, 19.9% QoQ, respectively. South based companies are expected to perform relatively better in terms of sales volumes on lower base impact while performance of companies with higher presence in east is expected to stay weak.
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