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Volumes improve MoM; prices still higher YoY
Volume growth comparison for Oct’19 on YoY basis cannot be meaningful owing to the early onset of festive holidays this year vs last year, in our view. On a reported basis, industry volumes likely declined in mid-single digit YoY in Oct’19 impacted by extended monsoon, festive season and a sharp decline in South region volumes on a high base. However, demand across most regions improved meaningfully MoM as construction activities resumes. Average pan-India prices declined 1.5% MoM in Oct’19 led by a sharp 4.5% MoM decline in South region; though the same is still up 4% YoY owing to 11% YoY increase in North. We expect newsflow on volumes to improve hereon and that on pricing from Feb’20 based on seasonality. We maintain our positive view. UTCEM/ TRCL remains preferred picks. Volumes likely declined ~5% YoY / improved ~10% MoM to ~27.5mnte in Oct’19.
* South volumes likely declined in high-teens YoY led by sharp volume dip in Andhra Pradesh / Telangana (AP/T) on a very high base, heavy rains and change of government in AP. High base of South (~20% YoY growth last year) may limit overall growth at pan-India level in coming months. Prices declined 4.5% MoM in Oct’19 (still up 1% YoY) mainly led by significant price decline in AP/T. Prices are now sharply down ~10% YoY in AP/T; however, they are still higher by 4-5% YoY in rest of South. Companies attempted price hikes of Rs20-50/bag in Nov’19, which could not sustain.
* Volumes in West also likely dropped sharply YoY given significant volume decline in Gujarat owing to heavy rains and festivals while election code of conduct impacted volumes in Maharashtra. Ongoing infrastructure projects, including Mumbai-Nagpur Expressway, and better monsoon would likely drive demand over the medium term in Maharashtra. Average prices declined 2% MoM in Oct’19, still up 2% YoY. Prices are up 8% YoY in Gujarat; while the same are broadly flat YoY in Maharashtra.
* East, the only region likely to see mid-single digit YoY growth in Oct’19 with gradual pickup in government spending and channel-filling post monsoon. Average prices broadly stood flat on YoY and MoM basis in Oct’19. Prices are up by 3% YoY in Bihar / Jharkhand; while are same are likely down 3% YoY in West Bengal.
* Demand in North and Central regions likely remained broadly flat YoY in Oct’19 owing to extended monsoon and festive holidays. Demand in Delhi turned weak in Nov’19 due to the construction ban (as a pollution control measure) till 25th Nov’19. Average prices declined 1% MoM; however, the same are still sharply up 11% YoY in North and 4% YoY in Central owing to high utilisation. Average pan-India prices are still up 4% YoY in Oct’19. Besides, the companies expect the benefit of lower fuel/freight prices (Rs100/te) to likely reflect during H2FY20E.
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