INDIACEM - India Cements Ltd. Share Price

Management provided an optimistic outlook during the Q2 FY26 Earnings Call for UltraTech Cement. They highlighted the strong demand for cement, having sold over 31 million tons this quarter despite challenging weather conditions. Notably, sales volume growth was reported at 22.3% excluding the acquired assets from India Cements and Kesoram, while growth stood at 9.6% without past adjustments. The brand UltraTech itself achieved a growth of 13.2% year-over-year, with rural markets showing a growth of 13%.

Key forward-looking points include:

• The company is ongoingly converting India Cements and Kesoram brands into UltraTech, with India Cements already at a 31% brand transition and expected to exceed 40% by December 2025.
• They anticipate completing brand transitions for acquired assets by June 2026, a move projected to benefit overall EBITDA.
• A significant capex program of INR1,592 crores has been initiated for efficiency improvements at India Cements.
• Management plans to expand capacity by an additional 22.8 million tons, with 18 million tons focused on Northern markets. This is projected to be funded largely through internal accruals.

Regarding fuel costs, the mix of coal and pet coke was slightly adjusted, but overall fuel costs are predicted to stabilize. They expect the EBITDA per ton from their operating assets to remain strong at INR966.

Projections for industry demand growth remain high, with an anticipated 10% growth in rural markets and continued investment in infrastructure projects. Long-term, management remains confident in achieving a CAGR growth of 7-8%, supported by ongoing government projects and private investments.

1. Question: "Just on this expansion plan that you've announced. So, like after this, I just wanted to know how much more scope is there given that this is just focused on North and West?"

   Answer: "We are aiming to reach about 240-245 million tons capacity by fiscal '29, and there's scope for an additional 20-25 million tons beyond that. We are considering both brownfield and potential greenfield expansions depending on market demand, ensuring we continuously acquire mining rights and land."

2. Question: "And out of the INR200 per ton, which you summed up under various items, how much of it will go away essentially in Q3?"

   Answer: "Maintenance costs are expected to reduce significantly, potentially by about INR100. Thus, we anticipate a positive impact as we move into Q3, especially as many of our operational challenges will be resolved."

3. Question: "How do you see the pricing environment among players panning out?"

   Answer: "Pricing is fundamentally driven by demand. While we're focused on efficient operations, any adjustments in pricing will be influenced by market demand. If costs escalate, they will be passed on to the consumer but overall, pricing remains dictated by demand."

4. Question: "On industry demand, how was the demand in the second quarter? Is the earlier guidance of 6% to 7% industry growth for the full year achievable?"

   Answer: "Yes, I am optimistic that we can achieve the previous guidance. Our own volume growth bolsters my confidence, and it appears the industry demand is stabilizing. I estimate a growth of around 4.5% to 5% for this quarter."

5. Question: "Will the expansion get bunched up in FY '28 or will it be spread over '28, '29, '30?"

   Answer: "The expansions will not be bunched up; rather, they will be spread out evenly over the financial years. We plan to provide a detailed schedule in the next quarter to give clarity on this timeline."

6. Question: "What analysis can you share on supply oversupply risks in North given peers' expansions?"

   Answer: "I don't foresee an oversupply risk. UltraTech has consistently outperformed the industry growth rate. We expect our market share to increase from 28% to 32%-33%, driven by our strategic positioning, regardless of competitors' expansions."

7. Question: "You mentioned a premiumization benefit out of GST. Can you explain?"

   Answer: "The idea is that if a premium product becomes affordable due to GST adjustments, consumers will opt for these premium brands. For instance, if a product like UltraTech becomes accessible at a similar price point to competitors, it can catalyze premiumization in sales."

8. Question: "What are the estimated cost savings with increased green power usage?"

   Answer: "We aim to reach about 65% reliance on green power by the end of this growth phase. By minimizing reliance on thermal power, we anticipate cost advantages that will ultimately enhance our sustainability efforts and reduce operational expenses."

9. Question: "What would be the total capex number for ongoing projects over the next two years?"

   Answer: "We anticipate a minimum capex outflow of about INR10,000 crores per year as we progress with our ongoing projects and expansions."

10. Question: "On the capex cost, how much is the clinker capacity cumulatively that you are planning to add?"

    Answer: "We plan to add a total of about 15.68 million tons in clinker capacity through our expansion, focusing on debottlenecking and new facilities."