Building Materials Q4 Results Preview - Moderate Performance Continue: Prabhudas Lilladher

Prabhudas Lilladher Report

Building Material companies under our coverage universe are expected to report moderate revenue growth due to weak demand, increased competition and higher base. Additionally, a contraction in margins is expected due to increase in raw material prices and competitive pricing pressures.

However, we anticipate healthy volume growth of +23% YoY in plastic pipe sector. Conversely, tiles and bathware sectors are likely to experience lower growth of 5-7% YoY. We expect coverage companies to register sales growth of 7.0% YoY, given correction in realisations in plastic pipe and MDF segments.

With increase in raw material prices in woodpanel segment, previous year same quarter inventory gains in plastic pipe segment and lower sales in bathware, we expect margins to contract YoY (-140 basis points YoY) along with Ebitda/profit after tax decline of -1.2%/-7.2% YoY.

We prefer plastic pipe companies on account of-

1. healthy volume growth driven by plumbing and infrastructure segments,

2. capacity enhancement,

3. geographical penetration and expansion and

4. stability in raw material prices.

Our top pick is Astral Ltd. and Supreme Industries Ltd. given revenue/Ebitda/profit after tax compound annual growth rate of 21.3%/26.1%/33.9% and 15.4%/18.7%/19.9% over FY24-26.

Considering buoyancy in real estate, tiles demand with lag in real estate cycle will benefit Kajaria Ceramics Ltd. (being leader in the sector).

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