Key highlights

• The company sales volume increased by 15% to 2.1 mt in Q3FY18 from corresponding previous quarter, led by 28% volume growth in East to 0.54 mt and 11% volume growth in North to 1.57 mt. In East, the majority of sales is in Chhattisgarh (close to 60%) and the balance from other states including Maharashtra, Odisha and Madhya Pradesh. The product mix included 57% sales of PPC cement.

• The company overall capacity utilization stood at ~73% in 3QFY18 with northern region units operating at ~70% and eastern region unit at 80%. However, the clinker capacity utilisation is at optimum level (above 95%).

• The company clinker production for Q3FY18 from Northern units stood at 1.29 mt and Durg unit at 0.33mt.

• The company expects earnings at Udaipur Cement Works (part of consolidated earnings) to improve meaningfully from 4QFY18, led by improvement in plant utilizations. This plant is operating at 60-65% utilizations at present. The plant is expected to break even by FY2019.

• Cement demand on northern market grew by 5-6% in 3QFY18. The company expects sand mining ban in Rajasthan to effect demand further in Rajasthan, it expects the demand to grow by 6-7% in coming quarters. Further, demand scenario in Eastern markets continues to remain healthy.

• The company commissioned Waste heat recovery system (WHRS) of 7MW at its Durg plant, result in immediate saving of Rs70-80/tonne. Further, with the commissioning of 20 MW thermal power plant at Durg, expected in 3QFY19, will save another ~Rs100/tonne in FY20E. Thus, with these measures the Company expects its operating cost to decline by ~Rs150-200/tonne in FY20E.

• The company has not reversed the earlier DMF provision in Q3FY18 and is likely to be benefited by the same in Q4FY18.

• The company plans capex of Rs120 crore/Rs140 crore for FY19/FY20, respectively. Notably, capex for thermal captive power plant at Durg and Odisha grinding unit is pegged Rs70-80 crore and Rs100 crore, respectively. However, normal capex is seen at Rs40-50 crore each year.

• The company consolidated net debt as on December 2017 was at Rs 2250 crore and includes (1) standalone net-debt of Rs 1700 crore, and (2) Rs 550 crore at Udaipur Cement Works. The company is repaying Rs 50 crore every quarter or annual repayments of Rs 200 crore.

• The company expects cement to be higher in Q4FY18 than the average price of 3QFY18, as it has recently hiked the prices by Rs10/bag in Chhattisgarh after cap on cement prices in Chattisgarh (by the authorities) has now been lifted.