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Our channel checks suggest that pan-India average cement prices declined marginally (Rs2/bag) to Rs372/bag in Aug-23. Cement prices declined 3% MoM in the East, ~1% in South, and broadly stood flat in other regions. Average prices in Q2FY24-TD have declined by Rs3/bag vs. Rs10-12/bag in the past 3- 4 years over the same period. Industry volumes have likely grown in high single digits MoM in Aug-23, owing to lower intensity of rains. While volumes have likely grown in low teens YoY in Jul-Aug 2023. Industry participants are attempting for price hike of Rs10-35/bag (expected to be on the higher side in East region) for Sep-23. The absorption of price hike will be known over the next few days. Given the recent uptick in input prices (15-20% in the past couple of months) from the bottom, absorption of price hike will be required to sustain/upgrade consensus earnings estimates. Our top pick: UltraTech Cement

All-India average cement prices declined marginally MoM in Aug-23

Average cement prices declined marginally (Rs2/bag) on MoM basis to Rs372/bag in Aug23. Region wise, average prices have declined by Rs11/bag in East and Rs3/bag in South; prices remained broadly flat in West and Central regions; while prices increased by Rs4/bag in North region. In Q2FY24-TD, pan-India average cement prices have declined marginally (by Rs1/bag) on a QoQ basis; while they were marginally higher YoY. Industry participants are attempting for price hike of Rs10-35/bag (expected to be on the higher side in East) for Sep-23; absorption of the same will be known over the next few days.

Industry volumes are likely to have grown in low-teens in Jul-Aug 2023

As per our channel checks, industry volumes have likely grown in high single digits MoM in Aug-23 owing to lower intensity of rains. While volumes have likely grown in low-teens YoY in Jul-Aug 2023, with East and West regions likely to lead on the same. In YTD-FY24, industry volumes have likely grown in mid-teens YoY. Accordingly, FY24 is likely to be the third consecutive year of strong demand with double-digit volume growth.

Cost deflation to support profitability in the coming quarters

Cement companies have witnessed Rs50-70/ton input cost savings on a QoQ basis in Q1FY24. Despite the recent uptick in petcoke price levels ($20-25/ton) from their bottom, we estimate the industry to report Rs150-200/ton input cost savings in the next couple of quarters. Absorption of cement price hike will be crucial to sustain/upgrade consensus earnings estimates.

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