Cement Sector Check - Demand To Outpace Incremental Supply; Cost Pressures Receding: Nirmal Bang
Cement - Demand To Outpace Incremental Supply; Cost Pressures Receding; Turn ‘Positive’ On The Sector: Nirmal Bang
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Nirmal Bang Report
We believe that cement companies will report better earnings growth, driven by improved demand and return of pricing power. One of our key concerns was the unprecedented increase in operating costs, which has not affected margins severely and input costs are already showing signs of receding.
Lower operating costs and higher demand are likely to aid better pricing and help improve margins of the sector by at least 500-600 basis points.
We expect sector Ebitda margin to improve from 17.4% in FY23 to 22.4% in FY25 (20.6% in FY22). Ebitda/million tonne is likely to reach Rs 1,272 from Rs 1,123 in FY22.
We have raised our FY23 and FY24 estimates for most cement companies to factor in better pricing and improved cost structure, besides introducing FY25 estimates.
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