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Jun’23 Report Card: Key Highlights

* PAN-India wtd avg price moderated marginally M/M to Rs373/bag, this translates into Q1FY24 wtd. avg price at Rs377/bag (vis-à-vis Rs384/bag in Q4FY23)

* North/Central wtd avg price was marginally up M/M, West moved up +2% M/M, and South/East corrected 3% M/M.

* All-India avg trade price declined by Rs5-10/bag M/M given trade price drop in South/East by Rs15-20/bag (rest stayed flat M/M). All-India avg non-trade price grew Rs2-5/bag given the uptick in North/West non-trade price (+Rs5/20 per bag) despite South & East price correction (Rs5-10/bag).

* As per DIPP, volumes grew +12% y/y in Apr’23 and as per our channel checks the demand continued in Jun’23 aided by higher infra and construction activity. We believe volumes in Q1FY24 for North/West should grow in mid-single digit y/y, whereas East/Central & South should see high-single digit y/y growth.

* Pet coke and Imported coal continued their downtrend to $105/114 per tonne, compared to $160/147 per tonne by Mar’23 exit and $240/355 per tonne in Jun’22, respectively. Pet coke continues to be a cost-effective option at Rs1.28 per kcal/kg on a 3-month trailing average v/s imported coal at Rs1.69 per kcal/kg.

Our View

For Jun’23, our channel checks hint at a mid to high single digit volume growth y/y, while All-India weighted average price moderated 1-2% q/q against Q4FY23 avg price. In Jun’23, 3-month trailing blended fuel cost corrected to Rs1.5 per kcal/kg vis-à-vis ~Rs2.33 per kcal/kg in Q4FY23. We expect the easing costs to aid industry EBITDA accretion towards reporting +Rs1,000/te, notwithstanding a marginal NSR moderation in Q1FY24E. Blended spot fuel cost (pet coke & imported coal) corrected by 5% M/M in Jun’23 translates to Rs1.32 per kcal/kg and which should reduce P&F cost to the tune of Rs250-300/te by Q2FY24E. We reiterate our POSITIVE stance on the sector guided by robust demand and easing costs, which may surpass earnings expectations. Our top picks are UTCEM, DALBHARA, SGC & ORCMNT.

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