The real estate market in India is booming, and building material companies are expected to see strong performance in terms of volumes and margin growth during the third quarter of fiscal year 2023-2024.
Despite a higher base, building material companies are likely to report moderate to strong volume growth, while a decline in raw material prices would aid margin expansion in Q3FY24.
Brokerage firm Prabhudas Lilladher anticipates healthy volume growth in the plastic pipe sector, with around 12% year-on-year (YoY) growth. However, the tiles and bathware sectors are estimated to experience lower growth of 5-7% YoY.
The firm expects companies to register sales growth of 5.8% YoY, with margins improving by 190 bps YoY. EBITDA and PAT growth are also expected to be strong at 21.1% and 28.9% YoY, respectively.
The plastic pipe sector is expected to report EBITDA margin expansion of 230 bps YoY to 14.7% in Q3FY24, with stable raw material prices. Sales volume is expected to grow by 11.8% YoY, driven by healthy demand in the plumbing segment.
In the Tiles & Bathware segment, Kajaria Ceramics is expected to report revenue growth of 6.9% YoY, with lower tiles volume growth of 7.3% YoY. EBITDA margin is expected to improve to 16.0%, while Cera Sanitaryware is expected to witness revenue growth of 4.1% YoY.
The woodpanel sector is anticipated to experience pick up in MDF volume, with Century Plyboards and Greenpanel Industries expected to see strong growth. PAT growth for these companies in Q3FY24 is estimated at 20.7% and 31.6% YoY, respectively.
Overall, the sector remains positive due to buoyancy in the real estate market, government focus on housing and infrastructure, and normalization in raw material prices. Woodpanel companies are preferred due to stabilization in timber prices and healthy volume growth expectations.
Investors are advised to consult with certified experts before making any investment decisions.