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Informist, Wednesday, Jan. 22, 2025

By Sunil Raghu

AHMEDABAD – The estimates of analysts tracking the cement sector suggest that their belief of a turnaround in the sector's fortunes may well come a cropper. In Jul-Sept, several external factors – unseasonal rains, softer cement prices, and delay in allocation of funds for infrastructure projects in the immediate aftermath of General Elections in the country – saw the cement business languish.

The Oct-Dec quarter was expected to be a pivotal period for cement demand. The analysts believed the sector was in for a gradual recovery in the second half of 2024-25 (Apr-Mar), as construction activity generally picks up post the monsoon. They had expected a resumption in infrastructure projects, improved weather conditions, and a rebound in trade and non-trade to help revive the demand for cement.

However, looking at the numbers suggested by analysts in the case of ACC Ltd, it seems that while the demand push seems to have come, it might not be enough. ACC Ltd's consolidated net profit for Oct-Dec is likely to jump 72.3% on quarter but fall 36% on year to INR 3.4 billion, according to the average of the estimates of a dozen brokerage firms. Among the 12 analysts polled by Informist, IDBI Capital Market Services Ltd has the highest estimate for ACC Ltd's net profit for the December quarter at INR 4.4 billion. KR Choksey Ltd sees ACC achieving a net profit of INR 2.6 billion, the lowest estimate among the analysts polled.

The consolidated net sales for Oct-Dec are expected to rise 0.8% on year and 7.4% on quarter to INR 49.5 billion. Elara Securities (India) Pvt Ltd sees it at INR 53.8 billion, with IDBI Capital Market Services Ltd's estimate of INR 47.1 billion the lowest among all 12 analysts.

For Jul-Sept, the cement maker had a net profit of INR 2 billion on sales of INR 46.1 billion.

IDBI Capital, whose estimates for ACC Ltd's Oct-Dec earnings are on the highest side of the band for net profit but the lowest for sales, expects the cement maker's volumes to rise 5% on year and realisations by 2% on quarter due to "slightly" muted cement prices. It has modelled ACC Ltd's EBITDA per tonne at INR 665, owing to lower realisations.

The brokerage states that among cement companies, it prefers ACC Ltd due to its pan-India presence and expects cement prices to improve further in Jan-Mar.

KR Choksey, which expects the lowest net profit for ACC, sees the company's volume growth at a "modest" 7.9% on year. It attributes this rise to the benefits derived from the master aupport agreement with sister cement companies from Adani Group -- Ambuja Cement Ltd and Sanghi Industries Ltd.

Unlike IDBI Capital, KR Choksey sees soft cement prices contracting the cement maker's revenues by 2.0% on year. It also projects ACC Ltd's EBITDA to decline 39.8% on year and EBITDA per tonne to fall 44.2% on year to INR 567.

On the other hand, Motilal Oswal expects the cement manufacturer's volumes to decline 11% on year and blended realisations to fall 9% on year. ACC Ltd's EBITDA per tonne is likely at INR 601, down from INR 1,017 per tonne a year ago but higher than INR 462 per tonne in Jul-Sept.

Meanwhile, the average of the estimates of 11 analysts pegs ACC Ltd's earnings before interest, tax, depreciation and amortisation at INR 6.2 billion, with a range of INR 5.5 billion-INR 6.9 billion.

Looking ahead, the key areas that analysts have enlisted for monitoring include potential merger developments involving Adani Cement, progress on capex timelines, and strategic utilisation of the company's high cash and cash equivalent reserves. The brokerages would also watch out for margin sustainability.

ACC Ltd will announce its earnings for the December quarter on Monday.

On Wednesday, the company's shares closed at INR 2,000.75, down 0.8% on the National Stock Exchange. At the current price, the stock is down nearly 11% after the company announced its September quarter earnings on Oct. 24. On the day of its earnings, the stock had closed marginally higher, but opened at INR 2250, down 0.5% on the following day.  

Following are the Oct-Dec earnings estimates for ACC Ltd based on reports from 12 brokerage firms in descending order of the estimate of net profit: 

End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Edited by Avishek Dutta

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