Cement top-line to grow by 13.2%, YoY: Angel

Angel Broking has come out with its earnings estimates on cement sector for December quarter FY13. The research firm expects top-line to grow by 13.2% yoy and Margins to remain under pressure.

Angel Broking Q3FY2013 expectations for cement sector:

Top-line to grow by 13.2% yoy

We expect our cement universe to report a 13.2% yoy improvement in the top-line, driven more by higher realization. Amongst the companies under our coverage, JK Lakshmi Cement is expected to post the highest top-line growth of 21.0%. Amongst the large caps, Ambuja Cements is expected to post the highest top-line growth of 18.2%.

Margins to remain under pressure

Despite a better yoy realization, we expect most of the companies to face margin pressure on account of higher costs. Most of the costs, ie raw material, freight and power costs have gone up on a yoy basis. However, Ambuja Cements is expected to post a 250bp yoy expansion in OPM on account of a low base.

Outlook and valuation

In our view, the cement sector's valuations in terms of EV/sales and EV/tonne are ahead of the cycle when compared to utilization levels and are almost 40% more expensive than historical valuations during periods of similar utilization levels. Hence, we maintain our Neutral view on the sector.

Quarterly estimates (Rs Cr.)

Company	Net Sales		Net Profit
	3QFY13E	% chg	3QFY13E	% chg
ACC^	2,768	10.6	289	19.2
Ambuja^	2,753	18.2	353	16.9
IndiaCem.	976	3.4	41	-41.4
JK Lakshmi	531	21	54	9.1
Madras Cem.	870	17.4	77	0.8
Shree Cem.*	1,400	11.2	182	207.7
UltraTech	5,158	12.9	532	-13.6

Note: Price as on December 31, 2012; ^December year ending; *June year ending

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.