![](\"\/\/im.rediff.com\/money\/2023\/oct\/17oct-cement1.jpg?w=670&h=900\")
<\/p>\nWith another quarter of steady growth in demand, cement companies are expected to report strong year-on-year (Y-o-Y) growth in earnings, according to analysts.<\/p>\n
<\/p>\n
The September quarter (Q2FY24) also witnessed a resumption of price hikes in certain markets.<\/p>\n
UltraTech Cement, India’s largest cement producer, reported a 15 per cent Y-o-Y increase in cement sales in the country for the quarter under review.<\/p>\n
Analysts believe that major players like UltraTech may have expanded their market share in the past quarter.<\/p>\n
“We expect cement industry demand growth at 12-14 per cent Y-o-Y in Q2FY24.<\/p>\n
“We estimate 15 per cent Y-o-Y volume growth for our coverage universe, factoring a gain in market share by larger players,” wrote analysts in a Kotak Securities note.<\/p>\n
![](\"\/\/im.rediff.com\/money\/2023\/oct\/17oct-cement.jpg?w=670&h=900\")
The second quarter of a financial year is typically a weak period for cement companies due to the monsoon season slowing down construction activity in various parts of India.<\/p>\n
However, Q2FY24 witnessed steady growth and stable prices.<\/p>\n
Demand growth in Q2FY24 was accompanied by costs remaining flat sequentially and falling compared to the high cost base of the previous year.<\/p>\n
Kotak Securities expects cement Ebitda (earnings before interest, taxation, depreciation, and ammortisation)\/tonne to see a marginal sequential increase and a 60.5 per cent Y-o-Y rise to Rs 966\/tonne, driven by stable costs and prices during the quarter.<\/p>\n
Analysts at Axis Securities expect Ebitda\/tonne of the companies under their coverage to improve by 64 per cent to Rs 870, from Rs 530 in Q2FY23.<\/p>\n
They said: “Owing to lower operating costs over last year, … since last year was negatively impacted on the back of higher energy prices as many companies reported quarterly loss.”<\/p>\n
Revenue growth, the broking firm said, is expected to come in at 12 per cent Y-o-Y, and profit after tax growth would likely be 166 per cent YoY.<\/p>\n
CRISIL noted in its half-yearly rating round-up on the sector that power and fuel costs, which account for 30-35 per cent of production cost, declined 10 per cent during the first quarter of FY24 and they may have declined further as high-priced inventory would have been replaced with cheaper inventory, following the softening of coal\/petcoke prices.<\/p>\n
“This will improve the per-tonne profitability of cement makers to Rs 950-975, as against a multi-year low of Rs 770,” the rating agency said.<\/p>\n
Analysts with Motilal Oswal expect the sector to report 72 per cent Y-o-Y earnings growth on a low base of earnings reported last year.<\/p>\n
Q2FY24 also saw cement companies attempt price hikes in certain markets, including east India.<\/p>\n
“Historically, Q2 usually sees a price correction relative to Q1, which was not the case this time due to robust demand and producer pricing discipline,” noted analysts with Axis Securities.<\/p>\n
Analysts with Antique Stock Broking noted that average prices are likely up 1-2 per cent sequentially in the northern, eastern, and central regions; prices in south and west India have likely declined 3 per cent and 1 per cent sequentially, respectively.<\/p>\n
“Dealers indicate that companies may announce price hikes of Rs 40-50\/bag in the south and Maharashtra markets and Rs 5-20\/bag across most other regions during October,” the analysts noted.<\/p>\n