INDIACEM - India Cements Ltd. Share Price

Management provided an optimistic outlook during the earnings call for Q4 FY '25, highlighting several key achievements and forward-looking strategies. UltraTech Cement reported a total capacity increase from 140 million tons to 184 million tons, contributing 57% of the new 30 million tons added to the industry, which now stands at 655 million tons. They experienced a strong 10% volume growth against a 4% industry average.

For India Cements, management announced significant developments since taking charge, achieving an EBITDA breakeven in Q1 2025 and exceeding 1 million metric tons in sales for March. They aim for an EBITDA per metric ton of INR 500 by FY '26 and INR 800 by FY '27, with plans to allocate INR 1,500 crores for capex focused on WHRS and operational improvements over the next two fiscal years. Notably, management outlined the strategic potential of brownfield expansions within India Cements.

Management also indicated that total capex for FY '26 will be in the range of INR 9,000 to INR 10,000 crores, with a heavy focus on strategic investments and expansions to raise their capacity to approximately 212 million tons. They highlighted a net debt-to-EBITDA ratio of 1.16x, expecting this to decline as sales volumes and margins improve.

On the demand front, management anticipated double-digit growth in volume for FY '26, emphasizing a steady government spending on infrastructure and new projects. Though short-term challenges due to high temperatures and their impact on construction activity were noted, management remained confident in a positive long-term outlook with existing efficiency improvement programs projected to deliver upwards of INR 300 per ton by FY '27.

Question 1: "Any specific reason for the remark regarding short-term challenges while the long-term is better? How should we look at volume?"

Answer: In the short term, particularly this quarter, the impact of the heatwave is significant, affecting construction activity. However, overall, we expect substantial demand in the long term, with cement showing positive growth trends as we move forward.

Question 2: "What is the expectation on volume growth for FY '26?"

Answer: We anticipate double-digit growth for FY '26, factoring in a higher base, including our recent acquisitions of India Cements and Kesoram.

Question 3: "Can you provide insights on pricing trends compared to previous quarters?"

Answer: Pricing has shown improvement this month compared to last quarter. However, local market dynamics often dictate specific pricing movements, which are best assessed based on regional knowledge.

Question 4: "What profitability trajectory can we expect for India Cements during FY '26 and FY '27?"

Answer: We expect India Cements' EBITDA to reach INR 500 per ton by FY '26, and INR 800 per ton by FY '27, driven by efficiency improvements, volume growth, and operational optimizations.

Question 5: "When do you expect to complete the rebranding of India Cements?"

Answer: We aim for the full transition to UltraTech branding for India Cements to occur by the end of FY '27, while strategic improvements are also being implemented throughout this period.

Question 6: "What is the target for the blending ratio in the coming years?"

Answer: Our aim is to achieve a blending ratio of 1.54 by the end of FY '27, driven by ongoing operational enhancements within our production processes.

Question 7: "What is the company's target leverage on net debt to EBITDA?"

Answer: We aim to bring net debt-to-EBITDA down to 0.5x. With current growth in volumes and EBITDA, we expect to achieve this relatively quickly.

Question 8: "What is your outlook on supply at the industry level for FY '26?"

Answer: We estimate the industry will see supply growth of around 40 million to 50 million tons in FY '26, contributing to overall market dynamics.

Question 9: "Are there any updates on the Kesoram volumes?"

Answer: Kesoram's volume for Q4 was 1.53 million tons, and we expect this to positively contribute to our overall performance as we integrate these operations.

Question 10: "Which factors are driving your current pricing trends in the South?"

Answer: Pricing is largely influenced by demand and supply dynamics in the region, which remain fluid. However, we are optimistic that improving demand will lead to favorable pricing stability.