Q4FY22 Result Preview - Cement - ICICI Direct

After passing through challenges like unseasonal rains, labour shortages during Q3, cement demand witnessed a gradual improvement in Q4FY22E with March witnessing a strong rebound in terms of sales volume as per dealer's feedback. However, given the high base of last year that saw 24% YoY jump in volumes, sales volume for Q4FY22E is likely to remain flat YoY while it may improve 16.3% QoQ to ~61.3MT for our coverage universe. For full year FY22E, we expect the industry to end the year with sales volume growth of 9% while cost inflation remains a key near-term concern for the sector. Petcoke, coal and diesel prices has seen unprecedented rise since February 2022. Q4FY22 average prices of international coal are up 14% vs. Q3 average (refer charts) while current rates of coal/petcoke are up another 23% and 25% QoQ, respectively. As the industry normally operates with two to three months of fuel inventories, the sector would witness marginal impact of fuel cost inflation in Q4FY22E. Taking this into account, we expect our I-direct universe EBITDA margins to decline ~35 bps QoQ to 16.7%. To mitigate the full impact of cost inflation from Q1FY23E, players have again taken price hikes in the range of Rs. 20-40/bag across all regions from April 2022 onwards. Overall, for Q4FY22E, our I-direct cement coverage universe is expected to report flat QoQ EBITDA/t while it will be sharply lower by 26% YoY. Region wise, performance of north and south based companies is expected to remain relatively better while east and west region are expected to report a moderate performance.

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Source : Equity Bulls

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Cement ICICIDirect Q4FY22 ResultPreview