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ICICI Securities Report
Building material companies under our coverage universe are expected to report tepid revenue growth in Q2 FY23E on high base YoY (pent-up demand YoY due to Q1 FY22 being impacted by the resurgence of pandemic).
However, growth in H1 FY23 YoY is expected to be in double digits (baring pipe companies) with demand momentum remaining healthy.
Profitability is expected to remain tepid in the quarter (Q2 FY23) on account of adverse impact of higher raw material prices and no meaningful price increases taken in the quarter.
For Q2 FY23E, we estimate tile companies under our coverage to witness a flat YoY volume growth on high base (three-year compound annual growth rate of 7.9-8.4%) with operating margins declining sharply YoY (down 434 bps to down 371 bps) due to severe input price inflation.
In plywood segment, we expect volume growth of 0.6-3% YoY (three-year CAGR: 1.8%-14.2%) with operating margins declining YoY on higher raw material cost inflation.
For pipe companies, we estimate volume to decline by 3.0-17.8% (three-year CAGR: down 0.4% to up 6%) due to destocking by dealers as PVC resin prices declined continuously in the quarter.
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