Cement cos March quarter top-line to grow by 8.1%: Angel

Angel Broking has come out with its earnings estimates on cement sector for the March quarter FY13. According to the research firm, cement companies top-line to grow by 8.1% yoy. However, margins to remain under pressure.

Angel Broking report on cement sector:

Top-line to grow by 8.1% yoy

We expect our cement universe to report an 8.1% yoy improvement in its top-line driven more by higher realization. Among the companies under our coverage, Madras Cement is expected to post the highest top-line growth of 19.1% aided by healthy demand scenario in Tamil Nadu and strong pricing environemnt.

Margins to remain under pressure

Despite better yoy realization, we expect most of the companies under coverage to face margin pressure on account of higher operating costs. Thus, we expect our cement universe to report a 12.8% de-growth in net profit during the quarter.

Outlook and valuation

Cement stocks witnessed a strong rally during CY2012 buoyed by their healthy earnings performances. Earnings remained strong despite modest demand growth due to the healthy pricing scenario. However, worsening of the cement demand scenario has put pressure on pricing. We do not expect any significant improvement in the earnings profile of cement companies over the next year . Hence we continue to remain Neutral on the sector. However, we have a Buy recemmendation on ACC and JK Lakshmi Cements due to their cheap valuations.

Company	Net Sales		Net Profit
	4QFY13E	% chg	4QFY13E	% chg
ACC^	3,084	7.8	333	-13.2
Ambuja	173	2,834	-834	378
IndiaCements	1,180	6.4	57	-15.7
JKLakshmi	531	0.9	42	-43.1
MadrasCem.	1,086	19.1	93	-6.3
ShreeCem.*	1,510	9.7	207	76.8
UltraTech	5,731	7.4	731	-15.7

^December year ending; *June year ending