Regional Cement Manufacturer maintaining stable outlook

Regional Cement Manufacturer maintaining stable outlook

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Cement

Cement demand is expected to pick up in select geographical areas including southern and northern markets.

With construction activities increasing in the southern region a higher demand for cement in that market is in the cards. The north would have less capacity addition than rest of India, which would favor greater pricing power for cement makers operating there.

This would help regional players such as Dalmia Bharat, JK Cement, JK Lakshmi Cement, Mangalam Cement and The Ramco Cements to record better volume growth than pan-India players. They are trading at a discount of 30-50% in comparison with pan-India large cement players such as UltraTech Cement, ACC, Ambuja Cements and Shree Cement.

The demand for cement in most regions has been affected as a consequence of the recent demonetization in the country. The southern part relying less on cash transactions is out of harm’s way. It is estimated that the northern and southern regions will add 6.1 million tonnes and 10.1 million tonnes in its capacity in the next three years. In comparison with this, capacity additions in the eastern, western and central regions are expected to be 24.1 million tonnes and 10.4 million tonnes respectively.

The new irrigation and road projects in the states of Andhra Pradesh and Telangana will create a strong demand for cement in the southern region

On average, the enterprise value (EV) of regional players is 9.6 times the FY18 expected operating profit before depreciation (EBIDTA), while large pan-India companies trade at an EVEBITDA of 14.1.

News sources: pressreader.com

Picture sources: google.co.in

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