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  • Sector alert: Cement | Weak start to the year

    Publish date: July 11, 2018

    The cement industry will have a considerable dent in their EBITDA earnings. This segment has been hit hard due to stagnant cement prices and increase in production costs. The only upside was the increase in cement volumes, but that is due to a GST-enforced low base last year.

    Key Highlights

    • We expect a 13-27% decline in earnings.
    • Cement prices showed marginal increase, but has slipped sharply on a yoy basis. The prices in last year’s corresponding period were high due to demonetisation.
    • Costs of all companies have risen due to rupee depreciation and hike in pet-coke and freight costs. Pet-coke costs have grown by nearly 14% in the last six months. Packaging costs have also risen. We also expect higher slag prices to impact raw material cost.
    • The industry volumes increased by 11% yoy due to last year’s low base. While Ultratech will see a 31% increase due to acquired assets of Jaiprakash, regional players will see the volumes swell by 5-12%.
    • The realizations is estimated to decline by 1%.

    Valuation & outlook

    We maintain a cautious stance due to high valuation and slight increase in earnings for the next two years.

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