In the October-December quarter (Q3FY19), the volume growth for the cement industry remains robust at 10 per cent year-on-year (YoY) and 11 per cent on quarter-on-quarter (QoQ). The past year’s industry growth was 16 per cent YoY. The cement companies reported lower-than-expected Ebitda (earnings before interest, taxation, depreciation and ammortisation) due to lower realization in Q3FY19.
Analysts at Elara Capital expect cement industry cost pressures to subside due to softening in fuel cost. On the pricing front, South India has seen a sharp increase in prices in February. This should bolster earnings in the upcoming quarters.
The cement prices in South India have inched up by Rs 40-50 per bag effective from February 2019. There is a price hike of Rs 5-10 per bag in East India, while in North India. There is a price hike of Rs 10-12 per bag effective from February 6, 2019.
The petcoke prices peaked out by the end of Q2FY19 and started falling in Q3. The benefits could not be reflected in Q3FY19 financials because of the use of high-cost inventory but will be reflected from Q4FY19.
“Thus, we believe South India-based companies, such as Orient Cement and India Cement, are likely to outperform in the near term while in the long run, firms with a presence in Central, Northeast India and North India are like to outperform due to better demand-supply situation,” the brokerage firm said in sector update.