Building Material Q4 Preview - Pipe Segment Doing Well; Tiles, Plywood To Remain Subdued: ICICI Securities

ICICI Securities Report

We expect building materials companies under our coverage to report mixed performance in Q4 FY24. We expect healthy volume growth in pipes and MDF segments, while tiles and plywood segments remain entrenched in a muted demand scenario.

Pipe companies will likely report volume growth in the range of 9.8%–26.1% YoY with better demand from agriculture in this seasonally strong quarter; alongside, plumbing demand could remain healthy. Ebit/kg for pipe companies will likely strengthen QoQ by 20.5%-44.6% with the absence of inventory losses and operating leverage.

In tiles, Kajaria Ceramics Ltd., Somany Ceramics Ltd. are expected to see muted volume growth of 8%/5.2% YoY accompanied by 160 basis points YoY/249 bps YoY margin improvement due to lower raw material cost and favorable base.

In plywood segment, we expect moderate volume growth of 6.6%/10% YoY for Century Plyboards India Ltd., Greenply Industries Ltd. with operating profit margin declining 380 bps/293 bps YoY due to higher raw material prices.

In MDF, domestic volumes for Greenpanel Industries Ltd., Century Plyboards are expected to grow 21.9%/33.5% YoY (+19%/12.8% QoQ) with adjusted operating profit margin declining ~23 bps/130 bps QoQ for both Greenply Industries Ltd. and Century Plyboard due to continued raw material pressures.

We prefer Kajaria Ceramics in tiles, Prince Pipes and Fittings Ltd. in pipes (post recent stock price correction) and Greenply/Greenpanel in woodpanel segment.

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