Earnings Outlook
Weak demand, muted prices may hit Ultratech Cement
This story was originally published at 16:36 IST on 16 July 2024
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By Rajesh Gajra
MUMBAI – UltraTech Cement Ltd, the largest cement producer in the country, is likely to have faced weak demand and muted cement prices in the quarter ended June, putting brakes to strong net profit growth seen in the previous three quarters. During the quarter, the domestic demand-dependent cement industry was hit by an inability to raise prices due to feeble demand.
According to HDFC Securities, the slowdown in construction activity during the General Elections in April and May adversely impacted cement sales during the quarter. Brokerage Prabhudas Lilladher said the cement industry witnessed tepid volume growth in Apr-Jun. Motilal Oswal Financial Services estimates the average capacity utilisation of cement companies in the June quarter at 85%, against 88% in the year-ago quarter.
Sales realisation in the cement industry was under pressure as the price hikes attempted in Apr-May could not be sustained in June, according to Prabhudas Lilladher. The all-India average cement price was down by 4% on year in the June quarter, brokerage Motilal Oswal Financial said.
Ultratech Cement's consolidated net profit for the June quarter is seen at 17.83 bln rupees, up 5.6% on year and down 21% on quarter, according to the average of the estimates of 13 brokerages. Excluding an outlier estimate of 23.47 bln rupees by IDBI Capital Market Services, the average net profit estimate is 17.36 bln rupees, up 2.8% on year.
The consolidated net sales of the company, a pivotal member of the Aditya Birla Group, is estimated at 180.93 bln rupees, up 2% on year but down 11.4% on quarter. The earnings before interest, depreciation, and amortisation are seen ranging between 31.39 bln rupees and 35.24 bln rupees by 11 brokerages.
Brokerages estimate Ultratech Cement's sales volume to rise 5-6% and sales realisation to decline 2-4%. Kotak Securities' Institutional Equities Research estimates volumes of 30.7 mln tn, up 6% on year and down 9.3% on quarter, and a decrease of 3.8% on year and 2.1% on quarter in sales realisation "on account of price cuts". The cement company's volume is likely to have increased 5% on year and realisations fallen 3%, according to Motilal Oswal Financial Services.
The brokerage also sees the company's EBITDA per tn inching up to 1,030 rupees in Apr-Jun from 1,018 rupees a year ago, with overall EBITDA increasing 6% on year. According to the brokerage, the company's variable cost per tn is likely to decline 7% on year.
Ultratech Cement will detail its Apr-Jun earnings on Friday. Post the earnings, investors will watch out for the management's commentary on demand and pricing outlook for the rest of 2024-25 (Apr-Mar).
At 1418 IST, shares of the company were down 1.1% at 11,707.40 rupees on the NSE.
Following are the Apr-Jun consolidated earnings estimates for Ultratech Cement based on reports compiled by Informist from 13 brokerage houses:
| Brokerage firm | Net sales | Net profit | EBITDA |
| -------(In mln rupees)------- | |||
| Axis Securities Ltd | 1,79,070 | 18,710 | 34,700 |
| Emkay Global Financial Services Ltd | 1,75,622 | 16,374 | 31,513 |
| HDFC Securities Ltd | 1,85,840 | 18,102 | 33,944 |
| IDBI Capital Market Services Ltd | 1,95,108 | 23,465 | -- |
| Incred Research Services Pvt Ltd | 1,78,990 | 16,352 | 31,388 |
| Kotak Institutional Equities | 1,75,691 | 17,387 | 32,116 |
| KR Choksey Research | 1,79,145 | 16,325 | 32,264 |
| Motilal Oswal Financial Services Ltd | 1,81,113 | 15,546 | 32,474 |
| Nirmal Bang Equities Pvt Ltd | 1,88,855 | 18,757 | 35,235 |
| Nomura Equity Research | 1,79,956 | 16,960 | 32,681 |
| Nuvama Wealth Management Ltd | 1,82,446 | 18,841 | 34,730 |
| Prabhudas Lilladher Pvt Ltd | 1,76,014 | 18,062 | 32,844 |
| Sharekhan Ltd | 1,74,290 | 16,870 | -- |
| Average | 1,80,934 | 17,827 | 33,081 |
End
Edited by Avishek Dutta
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