Mangalam Cement Ltd Research ReportSector.update

Well geared up to ride on uptick in capex cycle… Against the backdrop of weak sentiments due to the pandemic, the operating performance of the cement sector in H1FY21 improved sharply led by strong demand from rural segment, improved pricing environment along with benign costs. The improved business environment led by lower interest rates and improved liquidity has also led to re-instatement of capex plans by major companies that were halted earlier post imposition of lockdown in April 2020. All-India asset utilisation also crossed 80% mark in October-November 2020 vs. 69% in Q2FY21 with plant utilisation in the eastern and central region remaining even higher led by strong demand. Against the likely new capacity additions of 54 MT in FY21E-23E, the same is now being revised upwards to 69 MT in the same period with improved business outlook. Though the quantum of additions has increased by ~15 MT, it may be a lesser worry (against history) given these announcements are from incumbents (no new players are entering the segment) and the industry has seen meaningful consolidation over the past few years. The new additions may very well get absorbed in our view as the sector remains the best proxy to ride India’s infra and real estate growth story.