UltraTech , ACC, Ambuja , share prices down 5-15% in a month as Q1 results miss estimates: Should you Buy, Sell or Hold?

Stock Market Today: UltraTech Cement , ACC Ltd, Ambuja Cements , Dalmia Bharat Ltd, Shree Cement share prices have seen decline 5-15% over last one month. The Nifty-50 share index during the period though volatile however is down just around 1.%.

The underperformance by the cement sector manufacturers as UltraTech Cement , ACC Ltd, Ambuja Cements , Dalmia Bharat Ltd, Shree Cement share prices has largely been the decline in earnings reported by the Cement manufacturers during Q1 leading to some disappointment for investors. The onset of monsoon in the ongoing September quarter means that not much is expected form the seasonally weak quarter.

Q1 misses analysts expectations

Analysts at Nuvama Institutional Equities said that “Q1FY25 turned out to be weaker than expected for the cement space across parameters, viz., volumes, pricing and profitability (Ebitda per tonne) down 19% sequentially to ₹832 for 11 major companies) largely due to weak pricing environment (with realisations declining 2.5% sequentially) and operating deleverage as volumes rose merely ~4%”

Ebitda stands or Earnings before interest tax depreciation and amortisation.

The Cement prices have continued to trend down in the quarter gone by and dipped further now in Q2. The all India average cement prices during the quarter at ₹342 declined from ₹345 in the previous quarter and ₹355 in the year ago quarter.

The same led to the fall in realisations for Cement manufacturers, The impact of Lok Sabha elections, Heat wave was also felt during the April-June quarter.

Analysts at Jefferies India Private limited said that the companies under their coverage posted a 5% year-on-year decline in Ebitda during Q1, a 6% miss compared to their estimates, which was driven by weaker prices.

The Average unit Ebitda or Ebitda per tonne at ₹845, fell ~Rs180 sequentially and ₹85 year on year. Industry volumes grew 2% year on year. Amid weak pricing environment, Jefferies has cut FY25 Ebitda estimates by 3-19%, and continuing pricing pressure is posing further risk to their estimates. The sharp deterioration in sector profitability as per Jefferies is also a tailwind for sector Mergers and Acquisitions and valuation driver for consolidators, they say

Analysts picks and outlook

The industry's volume increase in FY25 should be in the mid-single digits (6–7%), as per Nuvama estimates. Manufacturers as UltraTech Cement , ACC Ltd, Ambuja Cements , Dalmia Bharat Ltd, Shree Cement and others should see costs under control by implementing a variety of cost-saving initiatives. However majority of the leading cement producers are pursuing capacity expansions to drive volume growth and market share gains. Hence pricing is probably going to stay under pressure.

Nuvama key picks from the sector include JK Cement Ltd, while for Jefferies the relative preference also stays with JK Cement along with Ambuja Cements, UltraTech Cement.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions