Published on 13/06/2019 12:24:58 PM | Source: Yes Securities Ltd

Cement Sector - Price hikes sustain; demand takes backseat By Yes Securities

Posted in Broking Firm Views - Sector Report| #Cement Sector #Sector Report #Yes Securities Ltd


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Price hikes sustain; demand takes backseat

We recently interacted with cement dealers (network of 35 dealers) indicating yet another price hike in May. All India average cement price stood at Rs 375/bag during May as against Rs 359/bag in April (+4.4% MoM) while average prices are up by ~12% as compared to March. Prices have surged across all the regions except South with sharpest price hike in North (+7.5% MoM). However, dealers have mentioned about sizeable dent on volume due to elections, labor shortage and significant volatility in prices. Further, liquidity crunch of developers have increased the credit cycle (stretching more than a month), adversely impacting their cash flows. We strongly expect considerable drag in volume growth for cement companies during Q1FY20 on account of slowdown in trade and non-trade segment.


Central – Steep surge in MP prices

* Indore and Bhopal witnessed price hike of 5.8% MoM/2.9% MoM in May respectively while prices are up by 17.7%/12.2% when compared to March.

* Average cement prices stood at Rs 377/bag in May as compared to Rs 364/bag in April.


East – Price increase of 5.1% MoM

* Prices in Patna & Odisha were up by 7.7% MoM/10.4% MoM while Guwahati witnessed modest increase of ~2% MoM.

* Odisha has witnessed price hike of 25% over March-May period.

* Average cement price in East stood at Rs 368/bag as compared to Rs 350/bag last month.


South – Price decline expected in AP & Telangana

* Although prices have remained steady in South in May as compared to April, dealers have indicated price decline of Rs 10- 15/bag in AP and Telangana. Further, additional discount provided to dealers have already increased by Rs 10-15/bag in Bangalore and Chennai.

* Average cement prices stood at Rs 404/bag (+1% MoM).


West – Prices up and steady in Gujarat

* Prices in Ahmedabad, Surat and Vadodara are up ~7.5% MoM in May while Mumbai and Pune witnessed price hike of ~2.4% MoM/4.1% MoM respectively.

* Average cement price stood at Rs 364/bag in May as compared to Rs 345/bag in April.


North- Hike of 7.6% MoM

* Jaipur, Jodhpur and Udaipur witnessed price hike of ~8% MoM in May. Price hike in NCR market stood at 8.7% MoM.

* Overall average cement price in North stood at Rs 363/bag in May as compared to Rs 337/bag in April. 


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