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Our channel checks suggest that pan-India average cement prices witnessed a 1% MoM dip in Jan-24 owing to the relative slowdown in demand. Prices marginally increased YoY. The industry has witnessed the third consecutive month of price decline. Accordingly, pan-India exit prices currently stand ~2% lower than average prices in Q3FY24. Demand trends indicate volumes have likely declined in low single digit YoY, owing to the high base of last year, sandrelated challenges in some states of the eastern region and extreme winter conditions. Cement companies are likely to attempt price hikes of Rs10-30/bag across regions in Feb-24. However, we believe absorption of the same will be difficult, owing to the recent decline in fuel prices and increasing focus of companies on volume push to gain market share. Accordingly, we expect profitability of cement companies to remain flat/decline sequentially in Q4FY24. Our top picks: UltraTech and Ambuja.

Prices dip ~1% MoM in Jan-24; spot prices are ~2% lower than Q3 avg. prices

Average cement prices declined 1% MoM (Rs4-5/bag) in Jan-24. The drop was across regions, with the south witnessing a decline of Rs8-10/bag; the North, East, and Central regions reported a dip of Rs3-5/bag, while the western regions witnessed marginal decline of Rs1/bag. Prices broadly remain stable on MoM basis in Uttar Pradesh and Gujarat. The industry has witnessed the third consecutive month of reduced prices. Accordingly, pan-India exit prices currently stand ~2% lower than average prices in Q3FY24. Cement companies are likely to attempt a price increase of Rs10-30/bag (as it will help in sustaining current price levels) across regions in Feb-24. However, we believe absorption of the price hike will likely be difficult, owing to the recent decline in fuel prices and increasing focus of companies on volume push and market share gains.

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SEBI Registration number is INH000000354

Demand trends indicate volumes have likely declined in low single digit YoY, owing to the high base of last year, sand-related challenges in some states of the eastern region, and extreme winter conditions. Our checks suggest that industry volumes have likely declined in low single digit YoY in the northern and southern regions and mid-single-digit in eastern regions. While only Gujarat and UP are likely to have registered volume growth on a YoY basis in Jan-24. Overall, industry volumes have likely grown at 9-10% YoY in 10MFY24. Based on recent commentaries from various cement companies, the industry is looking at low single-digit volume growth in Q4FY24.

Fuel prices further declined 9% MoM in Jan-24

US petcoke CFR prices in Jan-24 fell 9% MoM at USD110/ton (declined 37% YoY) owing to downturn in the coal market. Spot prices are nearly 13% lower than average prices in Q3FY24. Domestic petcoke prices broadly stood flat MoM in Feb-24. We expect cement companies’ profitability to remain flat/decline sequentially in Q4FY24, as falling input prices and higher operating leverage are likely to be offset by lower cement prices.

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SEBI Registration number is INH000000354