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Ear to Ground: Seasonal breather in the near term

Our channel checks suggest that pan-India cement prices have taken a breather in May’25 (after a sharp hike in Apr’25) with prices broadly flat MoM/ up ~7-8% YoY at INR 388/bag. The current prices are the highest in the past 15-17 months. QTD, pan-India average prices are up ~4% sequentially mainly led by South (up 10-11% QoQ) and East (up 4-5% QoQ). Industry demand is likely to have been flat YoY in May’25 as the initial pick-up in demand was impacted partly by Indo-Pak cross-border tensions in the North and early onset of the monsoon in many parts of the country. QTD, industry demand is likely to have grown in lowsingle digit YoY. With the early onset of the monsoon and demand weakness, cement price momentum may face near-term pressure. As the sector enters a seasonally weak period, we expect stock performance to remain rangebound in the near term. Our top picks are UltraTech in largecaps and JK Cement in mid-caps

* Pan-India prices broadly flat MoM in May’25; up ~7-8% in 1QFY26-TD: Our channel checks suggest that pan-India average cement prices were broadly flat MoM (though up 7-8% YoY) at INR 388/bag in May’25. Post the sharp price hike in Apr’25 (in the range of INR 45-50/bag), price have declined by INR 5/bag in South. Prices in Central and North have also declined by INR 2-4/bag, while it has risen by INR 2-4/bag in East and West. QTD, pan-India average prices are up ~4% QoQ (7-8% YoY) mainly led by ~11% increase in South and 4-5% in East, while it has been broadly flat in other regions. With the early onset of the monsoon, we see increasing possibility of some price reversal over the next few days.

* Industry demand likely to have been broadly flat YoY/ up in high single digit MoM in May’25: Post soft demand in Apr’25, the initial pickup in demand in May’25 has been partly impacted by Indo-Pak cross-border tensions in the North for a few days and early onset of the monsoon in many parts of the country. QTD, industry demand is likely to have grown in low single-digit YoY with North being the only region where it is likely to have declined YoY. Given the government’s focus on infra and housing projects, along with increased rural/ urban demand, sustainable volume growth of 6-7% is expected in the coming years.

* Spot international petcoke are ~7% lower than average price in 4QFY25: US petcoke CIF/ landed cost at port now stands at USD 103/ 118 respectively, ~7% lower than average prices in 4QFY25. The recent thaw in US-China trade tensions has created some positive sentiment for US petcoke, contributing to the gradual price rise. In 4QFY25, various management commentaries have suggested sustainable cost savings potential of INR 150- 200/tn over the next couple of years.

* A strong finish to FY25: In 4QFY25, the aggregate EBITDA of coverage companies (comprising ~65% of industry capacity) grew by 12% YoY and 66% QoQ; blended EBITDA/tn was largely flat YoY/up 33% QoQ at INR 1,099/tn (+INR 273/tn QoQ). We expect coverage companies to register ~20% EBITDA CAGR over FY25-28E (post declining by ~10% YoY in FY25) with EBITDA/tn increasing from INR 844 in FY25 to INR 1,177 in FY28E.

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