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ICICI Securities Report
We expect building material companies under our coverage to report a tepid Q2 FY25. Pipe companies are expected to report volume growth of 6–15% YoY due to a slack in demand coupled with falling PVC prices in the first half of Q2, which resulted in dealer de-stocking. Ebit/kg of pipe companies is expected to remain muted YoY (except Finolex Pipes Ltd.) due to low operating leverage and some inventory losses, as PVC resin prices declined ~14% in first half of Q2 FY25.
For ceramic companies, we expect demand to remain modest with Kajaria /Somany Ceramics reporting volume growth of 10%/4% YoY; Cera Sanitaryware may see flattish YoY revenue growth in Q2 FY25.
Operating margins of ceramic companies will likely decline 32–57 bps YoY despite stable raw material prices, due to higher operating cost.
In the plywood segment, we expect volume growth of 9%/7% YoY for Century Plyboards/Greenply Industries with operating profit margin declining 20 bps/14 bps YoY (-130 bps/-35 bps QoQ) due to higher raw material prices.
In MDF, domestic volume for Greenpanel Industries may remain flattish, whereas for Century Plyboards it may grow 51.3% YoY (due to a low base and commissioning of new plant in Q4 FY24) with adjusted operating profit margin declining 9.3%/14.2% YoY for Greenply/Century Plyboard amid continued raw material pressures and various schemes offered by players due to heightened domestic competition.
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