ACC, Ambuja, JK Cement top picks of Nuvama post Q3 results: all firms see decent profitability improvement
Stock market today: UltraTech Cement, Shree Cement, ACC, Ambuja Cements and others saw good profitability improvement in Q3 led by better prices and declining costs. The forward outlook remains strong and analysts expect volume growth to improve too. ACC, Ambuja, JK Cement are Nuvama's top picks
Q3 review; The performance for cement manufacturers as UltraTech Cement, ACC , Ambuja ,Shree Cement and others was lifted by rise in Cement prices. The Cement realisations that had not improved much during first quarter FY24 however surprisingly started rising during Q2 till the start of Q3. Though after October the cement prices did not rise much, nevertheless Q3 average cement prices were much better than earlier two quarters of FY24.
As realizations improved the declining input costs further benefitted lifting the profitability of cement manufacturer.'
While UltraTech saw Earnings before interest tax depreciation and amortisation (Ebitda) per tonne at ₹1,191 improved 31.9% y-oy, Shree Cement Ebitda per tonne at 1388 was up 57.88% y-o-y as per Motilal Oswal Financial Srvices data. The Adani group companies ACC and Ambuja Cements also saw the matrix improve significantly. ACC clocked an impressive and strong 107% year-on-year rise in per tonne ebitda to ₹1017, while Ambuja's Ebitda per tonne at Rs1,038 was up 27.8% year-on-year.
Analysts at Nuvama Institutional Equities in their Q3 result review said that "Q3FY24 turned out to be better than expected for the cement sector in terms of profitability and Ebitda per tonne rose 27% sequentially to ₹1,120 for 11 major companies. this was largely on account of price hikes in Sep and October-23 and continued softening of power and fuel costs. The realisations impressed rising 2.5% sequentially and 1% year-on-year.
The volume growth that has remained strong in the country led by rising demand though was slightly soft due to festive season and state elections, nevertheless volume growth for 11 companies at 7% y-o-y still remained decent though lower than expectations.
However Nuvama analysts expect volume growth trend to pick up in Q4FY24 (prior to the election code of conduct setting in). The rollback of prices (to a major extent) is a cause for worry, whereas the recent fall in petcoke and coal prices would aid profitability by keeping costs in check they said. They maintain JK Cement, ACC, and Ambuja as our top picks.
Generally most analysts maintain positive view on Cement companies.
Analysts at Kotak institutional Equities also said that they expect 26% and 21% growth in the net profits of the construction materials (cement) companies in the Nifty-50 Index for FY2024 and FY2025, led by a sharp recovery in profitability in FY2024 from depressed levels of FY2023 and decent volume growth led by likely robust residential real estate volumes and continued strong investment in infrastructure (despite moderation in government capex budgets for the railway and road budgets in FY2025BE).
The sharp jump in profitability reflects modest increase in cement prices in FY2024 and sharp decline in power & fuel costs from 3QFY23. as per Kotak.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions
1,017 107%
We expect 26% and 21% growth in the net profits of the construction
materials (cement) companies in the Nifty-50 Index for FY2024 and FY2025, led by (1) a sharp
recovery in profitability in FY2024 (see Exhibit 75) from depressed levels of FY2023 and (2) decent
volume growth led by likely robust residential real estate volumes and continued strong investment in
infrastructure (despite moderation in government capex budgets for the railway and road budgets in
FY2025BE). The sharp jump in profitability reflects (1) modest increase in cement prices in FY2024
and (2) sharp decline in power & fuel costs from 3QFY23
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