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Our channel checks suggest that pan-India average cement prices witnessed a 1.5-2% MoM dip in Feb-24 owing to the fight for market share by larger players and a relative slowdown in demand. The industry has witnessed the fourth consecutive month of price decline. Accordingly, pan-India prices in Q4FY24-TD stand 3-3.5% lower than average prices in Q3FY24, led by east and south regions reporting a decline of 4-6% sequentially. Demand trends indicate volume recovery across most pockets on MoM basis; it has likely increased in mid-single digit YoY in QTD. Demand trends are expected to improve in Mar-24; but the price hike looks difficult due to volume pressure, driven by financial year-end factors. The sharp drop in pricing sequentially is likely to be partially offset by soft input prices and better operating leverage. Accordingly, the industry is likely to witness a decline of Rs70-100 QoQ in EBITDA/ton in Q4FY24E. Our top picks: UltraTech Cement and Ambuja Cements.

Prices dip 1.5-2% MoM in Feb-24; Q4FY24-TD prices are 3-3.5% lower than Q3FY24 average prices

Average cement prices declined 1.5-2% MoM (Rs6-7/bag) in Feb-24. The drop was across regions, with the east, west, and south witnessing a decline of Rs7-9/bag; the north reported a dip of Rs5/bag and the central region registered a decline of Rs2-3/bag. The industry has witnessed the fourth consecutive month of reduced prices. Accordingly, panIndia prices in Q4FY24-TD stand 3-3.5% lower than average prices in Q3FY24, led by the east and south regions registering a dip of 4-6% QoQ. Our checks suggest the industry is unlikely to see any material price hike before the general elections due to the anticipated surge in volume pressure in the upcoming weeks, driven by year-end factors.

Demand recovers MoM in Feb; likely rise to mid-single digit YoY in Q4FY24-TD

Demand trends indicate volume recovery across most pockets on MoM basis; while it has likely improved in mid-single digit YoY in Feb-24. To recap, demand in Jan-24 was lower than expected, owing to sand-related challenges in some states of the eastern region, extreme winter conditions, and a high base of last year. Our checks suggest demand has likely increased in mid-single digit YoY in Q4FY24-TD. Overall, industry volumes have likely grown at 9-10% YoY in 11MFY24.

Fuel prices increased 7% MoM in Feb-24; still >10% lower from Nov-23 levels

U.S. petcoke CFR prices in Feb-24 increased 7% MoM to USD120/ton (down 31% YoY); however, it was still >10% lower from Nov-23 levels. Domestic petcoke prices broadly stood flat MoM, down 25% YoY in Feb-24. At spot prices, fuel cost likely stands at Rs1.6/Kcal vs. average cost of Rs1.7-1.8/Kcal in Q3FY24. The sharp drop in pricing sequentially is likely to be partially offset by weak input prices and better operating leverage. Accordingly, the industry is expected to witness a decline of Rs70-100 QoQ in EBITDA/ton in Q4FY24E.

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