EUR 120.00 For Business Accounts Only

MOSL: Morning India (1/May/20): 1. Cement (Wait for pricing power gets longer); 2. Laurus Labs 4QFY20 (Enhanced growth visibility in FDF/Synthesis segment); 3. Financials (Credit growth moderates); 4. Expert Sp

Morning India (1/May/20):

Today’s top research idea
Cement: Wait for pricing power gets longer
** The COVID-19 pandemic has dented prospects of the Indian cement sector. Besides materially dragging the sector's improving utilization curve, the virus outbreak has also pushed ahead emerging pricing power of companies in the North/Central-India by at least two years. We estimate all-India clinker utilization to drop to 62%/72% in FY21/FY22E (from 79% in FY19) on account of 3.5% capacity CAGR amidst weak expected volumes.

** Given the sub-optimal expected utilization across regions, sustenance of production discipline would be the key to prices and margins. This, we believe, would be tougher to achieve for regions with higher capacity growth; East India with ~30% capacity growth is the worst placed.

** Due to the impact of COVID-19, we have cut our FY21 EBITDA/PAT estimates by 23-38%/31-60% for cement companies under our coverage.

** In such an uncertain demand environment, we prefer companies that (a) are moving down the cost curve, (b) have a strong balance sheet, and (c) provide valuation comfort. Thus, UltraTech and ACC are our top large-cap picks; JK Cement is our top mid-cap pick.

Piping hot news
Industry calls for stimulus, graded exit from lockdown
Indian industry called upon the government to allow a graded opening of business operations along with a stimulus package to get the economy back on track with the nationwide lockdown slated to end on 3 May. The curbs are unlikely to be lifted completely, with many parts still labelled covid red zones, but industry leaders said it was important to allow factories to restart even if at a fraction of their capacities.