UltraTech Cement Q4 preview: Net profit may surge 23% YoY; EBITDA/t may fall on weak prices

UltraTech Cement Ltd is set to announce its earnings on April 29.

India’s largest cement maker UltraTech Cement is expected to report robust Q4 earnings, both year-on-year (YoY) and sequentially, driven by strong volume growth fuelled by improved demand. However, operational efficiency metrics like EBITDA per tonne may suffer due to weak cement prices during the period.

UltraTech Cement  is set to announce its earnings on April 29. According to the average estimate of 12 brokerages, net profit is expected at Rs 1,976.58 crore, marking a 23 percent increase YoY and a 15 percent rise quarter-on-quarter (QoQ). Additionally, net revenue is expected to rise 9 percent YoY and 17 percent QoQ, to Rs 18,078.29 crore. EBITDA is anticipated to grow by 11 percent YoY and 14 percent QoQ to Rs 3,276 crore.

Analysts predict UltraTech will see quarterly volume growth in double digits, though yearly growth may be more moderate, in line with industry norms. Axis Securities estimates quarterly volumes to clock in at 34.55 million tonnes, up 26 percent QoQ and 9 percent YoY, while Motilal Oswal expects 35.2 million tonnes, an 11.2 percent YoY increase.

However, realisations are projected to decline by 1 percent YoY and 5 percent QoQ. Total cost per tonne is expected to decrease by 2 percent YoY and 4 percent QoQ. Consequently, blended EBITDA per tonne is expected to increase by 3 percent YoY, but decrease 10 percent QoQ to Rs 1,075 crore.

The cement sector saw a slow start to the quarter due to harsh winters in the north and festivities in the south. The east  struggled with fiscal challenges, but showed signs of recovery towards the quarter's end. Cement prices were under pressure in Q4FY24 due to rolled-back price hikes amid subdued demand. Price hikes initiated in Sept-Oct 2023 were mostly reversed in recent months.

West and central regions remained relatively stable with slight price declines, while the east saw sharper decreases due to fiscal challenges and increased capacities. Prices in the south and north  dropped around 10 percent YoY and 6 percent QoQ, respectively. Recent dealer checks indicate that cement companies have implemented price hikes ranging from Rs 20-60/bag across regions starting April 2024. The sustainability of these hikes will be monitored closely, especially with elections and the upcoming monsoon season, analysts said.

Despite challenges in pricing, stable input costs and operational leverage offer relief. US petcoke prices have dropped by $5-7/t to $122/t (down 28 percent YoY), and US coal prices have softened 5 percent QoQ to $120/t. Spot petcoke prices are also 6-7 percent lower than the average prices in Q4FY24.

Emkay estimated fuel cost savings of Rs 30-50/t in Q4FY24 (at Rs 1.6/Kcal compared to an average cost of Rs 1.7-1.8/Kcal in Q3FY24). With favourable input costs and leverage benefits, the total cost per tonne is expected to decline by Rs 125/t QoQ.

Analysts will closely observe the company's comments on pricing, demand trends, and forecasts for the current quarter and FY25. They'll also track the progress on its ambitious plans of expanding capacity to nearly 200 million tonnes per annum from the current 147.3 MTPA over the next few years, including the funding sources and potential acquisitions.