Monthly Update : Demand recovers by Elara Capital Ltd
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Demand recovers
All-India average price corrects INR 5 per 50kg bag in December
The cement industry has witnessed a MoM recovery in demand in most pockets. But cement prices have seen moderation. Per our discussions with dealers, sales executives, and C&F agents, it seems that certain areas have struggled to maintain the price hike attempts of early December and experienced either flat or negative price movements throughout the month. As a result, all-India average retail price dropped INR 5 per 50 kg bag MoM to INR 386 in December.
Per our channel checks, demand recovery has been partly hit by: 1) strengthening winters, 2) moderate construction activity due to pollution-related curbs in Delhi and the National Capital Region (NCR). 3) rise in agricultural activity in rural parts and 4) region-specific issues (cyclone in Telangana, lower sand availability in Odisha/Nagpur). Market intermediaries in most pockets expect cement firms to attempt price hikes in January but given the expected rise in inventory with the dealers due to quarter-end volume push and likely destocking in early January, absorption of such price hikes may get delayed to mid-January
Pan-India Q3FY24E average price may rise ~4% YoY/~5% QoQ
Per our channel checks, all-India average cement price may rise ~4% YoY and ~5% QoQ in Q3FY24E. The QoQ rise in average price by ~8% in East India may be the highest, followed by ~7%/~6% in South/North India. Prices in West/Central India rose ~2%/~1% respectively QoQ.
North, Central and East India – Prices pare ~INR 0-10/bag MoM
Price momentum continues to be weak in North, Central and East India in December. In Central India, prices in East Uttar Pradesh dropped INR 10/bag while in West Uttar Pradesh were flat MoM. Prices in Madhya Pradesh were down INR 5/bag. In East India, prices in Jharkhand and Odisha fell INR 10/bag each while in Bihar, Chhattisgarh and West Bengal were flat MoM. In North India, price in Delhi dipped INR 10/bag and in Rajasthan was down ~INR 5/bag. Prices in Punjab were flat MoM.
Price deterioration persists in South India
Select pockets in South India witnessed price hikes at the start of December, which were followed by roll-backs, resulting in a fall in average price in South India. In December, prices in Karnataka were largely flat MoM, while Kerala, Andhra Pradesh, Tamil Nadu and Telangana saw price cuts of INR 10/bag each.
West India– Gujarat broadly stable; Maharashtra mixed
Prices in Gujarat were flat MoM. In Maharashtra, Mumbai and Nasik have reported price cuts of INR 10/bag and INR 5/bag, respectively, while prices in Nagpur were flat MoM in December.
Outlook: Higher prices to bolster Q3FY24 realization
Price hikes as of end-Q2FY24 and in October may positively impact Q3FY24 margin. Also, expect sustained demand, led by continued strong government spending in the pre-election period and the busy demand season kicking in the upcoming months.
Above views are of the author and not of the website kindly read disclaimer
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