 "UltraTech Cement rallies 6% post Q3 results; Ramco, JK Lakshmi surge 5%")
Shares of cement companies were in demand with the sector giant UltraTech Cement up 6 per cent at Rs 11,338 on the BSE in Thursday’s intra-day trade after India's biggest cement maker by capacity said its domestic sales volume grew 10 per cent year-on-year (YoY) for the third quarter ended December 2024 (Q3FY25).
The government’s focus on infrastructure and housing projects together with increased rural and urban demand, UltraTech is expected to generate a sustainable volume growth of 7- 8 per cent, going forward.
Analyst at Elara Capital expected volume for the brokerage firm’s cement universe to grow ~7 per cent YoY (vs H1FY25 growth of 2 per cent YoY) and ~9 per cent in quarter-on-quarter (QoQ) in Q3FY25.
Post UltraTech’s Q3 results announcements, the stock price of Ramco Cement, JK Lakshmi Cement, JK Cement, Shree Cement, Birla Corporation and ACC were trading higher in the range of 2 per cent to 5 per cent. In comparison, the BSE Sensex was up 0.22 per cent at 76,572 at 02:30 PM.
For Q3FY25, UltraTech Cement reported 17.3 per cent drop in consolidated net profit at Rs 1,469.5 crore. Sequentially, however this was a huge turnaround for the cement firm, up 79.2 per cent from Rs 820.04 crore reported at the end of Q2FY25.
Consolidated revenue from operations saw a marginal rise of 2.7 per cent at Rs 17,193.33 crore, from Rs 16,739.97 crore reported during the same period last year. Sequentially, revenue rose by 10 per cent from Rs 15,634.73 crore.
Meanwhile, brokerage firm Elara Capital expects the cement industry to show a QoQ recovery in earnings in Q3FY25, bolstered by improved cement prices and positive operating leverage. However, earnings may remain subdued YoY, as the benefit of lower operating cost will be offset by continued weakness in YoY cement price trend.
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Industry earnings are likely to improve further in Q4, driven by increased government spending, ramp-up in construction activities with the start of peak season, higher exit prices from Q3FY25 and likely further price hike attempts by cement firms to capitalize on healthy demand. Earnings recovery is set to be more pronounced for companies in North India, as the region is better positioned to absorb price hikes, the brokerage firm said in the quarterly preview.
Analysts expect cement companies to benefit from lower operating cost, driven by access to low-cost fuel, internal cost-saving initiatives and operating leverage. As a result, the brokerage firm expects operating cost per tonne to decline ~3 per cent YoY and ~2 per cent QoQ. Overall, while EBITDA per tonne is likely to drop by ~28 per cent YoY, and expect a significant QoQ improvement of ~30 per cent, supported by benefits of operating leverage and uptick in cement prices in December.