Q3FY21 Result Preview - Cement - ICICI Direct

After witnessing price led revenue growth during H1FY21 due to lockdown impact, Q3FY21 is expected to witness volume led revenue growth. Sustained demand from individual housing (IHB) in semi urban and rural region and healthy pick-up in infra activities from September 2020 onwards would aid growth in volumes in Q3FY21. In the current fiscal, at all-India level, cement dispatches are expected to report first ever growth during the quarter. In terms of regions, we expect demand in the north, central and east to remain firm supported by higher welfare spending and better crop production. Further, improved demand from south and west region (supported by a pick-up in government led infrastructure activities) would provide support for sales volume growth during the quarter. Overall, for Q3FY21E, our I-direct cement coverage universe is expected to report volume growth of 7.7% YoY, 14.7% QoQ in sales volume to 52.8 MT.

EBITDA/t to improve YoY despite rise in cost of production

Average diesel prices are up ~10% YoY, which will lead to a rise in freight cost by Rs. 55/tonne. Also, petcoke prices inched up 26% QoQ (up 35% YoY). However, players switching to coal would help restrict its impact to ~12-14%. This would lead to another cost impact of Rs. 90-100/tonne during the quarter. On the other hand, we expect cost rationalisation drive initiated during H1 to keep overall cost of production under check. Also, cement prices despite QoQ correction are up 5.1% YoY. This is expected to lead to EBITDA/tonne growth 28.8% YoY to Rs. 1,125/t for our entire coverage universe.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_Cement_Q3FY21E.pdf

Source : Equity Bulls

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