Cement Sector Q3 Results Preview - Cost Pressure To Ease, Demand Outlook Encouraging: Axis Securities

Axis Securities Report

Traditionally, second half of the year stands out to be a favourable period for cement producers from a demand perspective as it revives after the end of the monsoon season. Post witnessing soft demand in Oct-22 due to festivity, demand revived sharply in Nov-22 and the trend continued in Dec-22 as well, which was driven by higher retail and institutional demand.

Institutional demand was more robust led by increasing construction activity in most of the regions as Q2 FY23 had been impacted due to an extended monsoon. Construction activity also picked up on account of lower commodity prices of building materials.

For companies under our coverage, we expect cement volume/revenue to grow at 9%/14% YoY owing to better demand and higher realisations. However, Ebitda/adjusted profit after tax is expected to contract by 11%/20% YoY, led by higher energy prices, though we see a sharp improvement in Ebitda/profit after tax on a QoQ basis. We estimate overall cement industry demand to grow in the range of 9-10% in FY23.

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