Cement companies to post higher price realisation in Q1, India

Cement companies to post higher price realisation in Q1, India
Published: 11 July 2006

The Indian cement sector is expected to post good numbers for April-June quarter despite a major correction in the benchmark Sensex and the government’s admonition of cement companies over abnormal price hikes.

Analysts expect the cement sector as a whole to report an impressive 19-20% rise in realisation due to a 7-8% growth in volumes. An analysts’ report from Sharekhan bets big on JK Cement and Shree Cement, which is expected to post, a growth in profits of 273% and 182%, respectively.

“The rise in price realisation should be more than that. The nation-wide average should be around 20-25%. The realisation differs from region to region and company to company. The rise in realisation is the lowest in the eastern part of India, as it saw the lowest rise in prices,” says Rajan Kumar, an analyst tracking cement sector at Networth Stock Broking Ltd.

The Sharekhan report also says, “We expect cement companies in the northern and southern regions, Shree Cement (north) and Madras Cement (south), to deliver a superlative performance. Among the cement companies in our coverage, JK Cement is expected to top the chart of earnings growth with a 273% growth in its net earnings. The contenders for the second and third slots would be Shree Cement, whose net earnings are expected to grow by 182%, and Madras Cement, whose net earnings are expected to grow by 77%, respectively. ”

A Mumbai-based analyst expects the operating profit margin (OPM) of UltraTech Cement Company and ACC to increase due to cost savings and higher leverage on firm cement prices.

“The cement sector will continue to report an impressive numbers for this last quarter, simply because of continued rise in cement consumption and prices,” adds the analyst. “Usually, cement prices go down during the monsoons, but look at the prices now - they have not gone down at all.”