Higher energy costs may dampen cement buyers
Increased energy costs may partly offset cement makers’ gains from higher prices and a better demand in the quarter ended June. The government’s infrastructure thrust will boost volumes after two quarters of subdued performance, ICICI Direct said in its pre-earnings note. The number of infrastructure projects awarded in the April-May period rose 59 percent year-on-year, the brokerage said. Morgan Stanley expects industry volume growth at 3-4 percent despite distributors reducing stock ahead of the GST and early onset of monsoon. The top eight listed cement companies’ net sales may grow 14 percent, on an average, in the quarter and net profit is likely to rise by a percent over the comparable three months last year, according to consensus estimates. Earnings before interest, tax, depreciation and amortisation (EBITDA) is expected to grow 18.15 percent year-on-year. Excluding Orient Cement, the aggregate operating profit of the top seven companies would fall to 1.98 percent, according to the consensus of analyst estimates tracked by Bloomberg. Besides Orient Cement, much of the growth could be witnessed by north-based-players such as Shree Cement and JK Lakshmi Cement. Sales of pan-India players like ACC and UltraTech Cement could also rise more than 10 percent year-on-year, HDFC Securities said in its pre-earnings note.
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