Consolidation good for cement sector: Ronald Siyoni, Sharekhan

“We expect it to be positive because larger peers are expanding capacities, partly through inorganic expansion and not by adding newer capacities to a greater extent. So overall cement supply may grow in high single digits, and it would be well compensated with demand which is expected to grow in high single digits also,” Siyoni told ET Now.

Stating that he sees an equilibrium in demand-supply dynamics going ahead, the expert said although capacity utilisation may remain flattered to marginally higher over the next few years, this would only lead to better pricing discipline in the wake of healthy demand and supply position.

In terms of operational profitability, the Q2 earnings season might turn out to be the bottom. “We expect EBITDA per tonne to be at a multi-quarter low for this quarter which would be affected by the peaking power and fuel cost. Petcoke or coal prices have been at peak levels during Q1 FY23, and that would be much more reflected in quarter two earnings, but from post that quarter, the prices have come down by 20% to 30%, which should positively reflect in companies earnings from Q3 onwards,” Siyoni said,

Sharekhan expects a healthy topline growth of 14%, contributed by 11% volume growth and 3% realisation growth YoY but EBITDA per tonne could be lower by 35% to 40% during Q2.