Cement companies are likely to register a sluggish performance in the April-June quarter as higher input costs — of pet coke, diesel, energy, and freight — continue to pinch margins. This could happen even after the firms announced a slew of price hikes and have had higher realisations.

According to Jefferies, in the June quarter, the average EBITDA per tonne — a key metric to determine the earnings on every tonne of production before interest, taxes, depreciation, and amortisation — could slip by Rs 450 on a year-on-year basis.

Jefferies estimates 16 percent year-on-year volume growth for the cement companies under its coverage in the three-month period.

According to HDFC Securities, cement manufacturers are likely to see no change in their EBITDA per tonne readings sequentially, but their total operating costs could increase by Rs 200-300 per tonne.

HDFC Securities estimates volumes to decline by 5-10 percent on a quarter-on-quarter basis on account of the seasonal impact. The brokerage also expects energy costs to increase by 100-150 per tonne due to rising pet coke and coal prices, and freight costs to go up by Rs 50 per tonne.

Higher realisations are likely to offset the overall increase of nearly Rs 300 per tonne in costs, the brokerage said. Companies with better exposure to the northern, central and eastern parts of the country are likely to benefit from higher prices, it added.

Nirmal Bang has a ‘neutral’ rating on the cement sector. It has UltraTech, JK Lakshmi, Nuvoco, and Birla Corp as its top picks from the space.

Also Read: Nepal starts exporting cement to India for the first time

According to Mangesh Bhadang, a research analyst at Nirmal Bang Institutional Equities, even the July-September quarter is going to be bad. "I don't see that there's going to be a sharp recovery in Q3 as well as Q4,” Bhadang said.

“The September quarter is definitely is going to be bad not only because of the higher coal prices but because of monsoon we would see some pressure on pricing as well. And we might see some more pressure because of competitive intensity,” he told CNBC-TV18.

Also Read: Cement makers in India are preparing to produce more despite depleting profit

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