At the same time, the industry’s efforts to reduce discretionary costs like advertisement, commissions, repairs, corporate expenses, etc are likely to pay off well.
Overall volumes in the June quarter, however, will decline. Sanjeev Kumar Singh at Emkay Research expects an aggregate volume decline of 30.3 per cent YoY for firms under his coverage. Nevertheless, he expects average Ebitda per tonne — a profitability indicator — to improve 5.7 per cent sequentially to Rs 1,142.
Despite demand woes, analysts at Jefferies expect Ebitda (of firms in their coverage) to average at over Rs 1,200 per tonne. This, according to them, is the second-highest level in at least 30 quarters.
While the realisation-led operating performance is a positive for now, sustainability of the trend in demand and prices over the next few months, too, are crucial, considering the monsoon season.
Though recovery in demand is likely during H2, labour availability and control over coronavirus hold the key.
For now, analysts are generally positive on UltraTech, given its expanded capacities. They say that even if further expansions are delayed by the present challenges, it will not impact UltraTech’s volume growth.
However, the same is not true for ACC, for which the Street has factored in the commissioning of 5.9 mt of capacities in eastern India, by end-2020. Among other firms, JM Financial is positive on Shree Cement and JK Cement.