Investors? shouldn’t get too excited about improving cement margins
For cement producers, a combination of price hikes and softening input costs should translate into better margins in the June quarter. But analysts suggest that investors shouldn’t get too excited since the improvement may not be sustainable. “Stable costs should improve sector margins in FY20E;
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Jul 13, 2019 6:13 AM
For cement producers, a combination of price hikes and softening input costs should translate into better margins in the June quarter. But analysts suggest that investors shouldn’t get too excited since the improvement may not be sustainable. “Stable costs should improve sector margins in FY20E; however, margin expansion is well factored in our and consensus expectations. Margins should peak in 1QFY20E and we would refrain from extrapolating it," analysts at Kotak Institutional Equities said in a report on 3 July. Recent dealer channel checks by various brokerage firms showed that cement prices across India failed to sustain at higher levels, given the subdued demand. Still, the average cement price at an all-India level at ?363 per bag is higher sequentially and annually. One cement bag weighs 50kg. This means although volume growth might disappoint, revenue growth would save the day in the June quarter. Second, operating costs continue to ease. According to Edelweiss Securities Ltd, prices of petroleum coke, imported as well as domestic, have corrected 10–15% over the past three months.
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