Heidelberg Cement’s outlook dims in the absence of expansion plans

In the earnings call, the management said that it expects good traction in cement demand in the near future. With calendar year (CY) 2023 being a pre-election year, cement demand is likely to improve. It is estimated that cement demand in the central region will grow by 5.5%-6% in FY23 and 7% in FY24.

But the problem is that at a time when many cement makers are pushing for capacity expansion, Heidelberg is lagging behind. The management said that the company is focused on increasing capacity only through debottlenecking and the ongoing debottlenecking is expected to be completed by FY24.

Analysts at HDFC Securities Ltd said, “In the absence of any major planned expansion for the next four years, we expect slow volume growth and market share decline to continue, as other players look to expand into the company’s core markets.” Have been.”

Secondly, the management’s commentary on prices was also not very encouraging. Cement prices in the region have remained subdued in Q3FY23 and early Q4FY23. However, one bright spot is lowering the cost. For Q3FY23, fuel cost was Rs.2.85/kcal as compared to around Rs.3.13/kcal in the previous quarter. Therefore, management is hopeful of a 10% sequential decline in its overall power and fuel costs in Q4.

Meanwhile, the stock has declined 9.30% so far in CY23. The stock hit a 52-week low of Rs 155.30 on February 1. On Friday, the company’s shares rose nearly 1.80% intraday to Rs 170 on the NSE. According to a media report, cement prices have been increased across India, due to which the shares of many cement makers saw a positive rally on Friday.