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Our channel checks suggest that pan-India average cement prices broadly remained steady MoM (Rs356/bag) in June-24. In Q1FY25, the average pan-India prices likely declined 3% (Rs9-10/bag) sequentially and ~4% on YoY basis. Our checks suggest that the pan-India demand declined in low-single digit YoY in June24 with Southern region witnessing double digit de-growth. We anticipate broadly flat to low-single digit YoY demand growth for Q1FY25E, supported primarily by demand recovery in May 2024. The sustained drop in prices sequentially, coupled with negative operating leverage may result in EBITDA/t declining by ~Rs150-200 in Q1FY25E. With gradual improvement in demand, cement prices are likely to improve materially in H2FY25. Top picks: UltraTech and Ambuja.

Cement prices steady in June-24; declined ~3% QoQ in Q1FY25

Despite multiple efforts to implement price hikes in Q1FY25, subdued demand and increased competitive scenario resulted in unsuccessful absorption of price increases. For a brief moment the industry absorbed a price hike of Rs3-5/bag in Apr-24; however, the same was reversed in May and remained flattish in June-24. Average prices in Q1FY25 likely declined ~3% QoQ (~Rs9-10/bag) on pan-India basis, with 2-3% drop seen in East and Central regions and 3-4% slump reported in North, West and South regions.

Volumes declined in low-single digit YoY in June-24; broadly flat-to-marginal growth in Q1FY25

Demand trajectory softened in June-24 and is likely to have declined in low-single digit YoY and high-single digit MoM in June-24. Demand in South region likely declined in double digits, and in high-single digit in the Eastern and Western parts; demand likely increased in low-single digit YoY in North and Central regions in June-24. For Q1FY25, we expect volumes to be broadly flat to marginally positive YoY. Structurally, the cement industry has been on an uptrend with healthy volume CAGR of 9-10% in FY21-24 (vs historical average of 5-6%). Demand may soften in H1FY25; however, we expect the next few years to be characterized by moderate volume growth (7-8% demand CAGR over FY24-27E).

Potential decline in pet coke prices if China's de-carbonization plan advances

US pet coke CFR prices in Q1FY25 have further softened 6% QoQ (declined 12% YoY) to USD109/t, whereas US coal prices are broadly stable (up 1% QoQ/down 9% YoY) at USD121/t. If China’s de-carbonization action plan is implemented, it will potentially lead to decline in pet coke prices to double-digit levels within the next 3-4 weeks.

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