The brokerage said apart from higher coal and pet coke prices, the recent increase in crude prices and ocean freight rates may further put pressure on operating costs for the cement companies.
Higher input cost assumptions have resulted in the brokerage cutting its operating profit and net profit estimates for FY23 and FY24.
“Rise in coal/pet coke price in the last one year led to a significant increase in variable cost for the industry,” said Motilal Oswal’s analyst Sanjeev Kumar Singh in a note to clients. “This, in turn, impacted the margin of Cement companies as the industry was not able to pass on the increase in RM costs to consumers.”
On Thursday, UltraTech shares dropped 6.5% to ₹5,981.85, Grasim declined 2.9% to ₹1,502.75 and ACC fell 5.2% to ₹1,955.15.
Motilal Oswal said there has been a 75% increase in South African coal prices and a 52% rise in Australian coal prices in the past month. “In the current volatile pricing scenario for imported coal and changes in the global geopolitical scenario (Russia-Ukraine standoff), it has become difficult to analyse the earnings impact on Cement companies,” said Singh.
