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Cement: Q4 prices down 7% QoQ; hikes likely in April

4 Apr 2024 , 10:26 AM

All India average cement price fell 3.7% MoM or by Rs12 per 50-kg bag in Mar’24 – as companies focused on achieving annual/quarterly target after subdued volumes in Jan-Feb. Prices fell for the fifth consecutive month and are down by Rs40/bag (~12%) since Nov’23.

  • Regionally, prices fell across regions with the highest decline seen in the East region (~8% MoM), followed by the South region (~4.5% MoM). Prices in other regions fell (~1.5-2.5% MoM).
  • On QoQ basis, all-India average cement price is down by 7% or by Rs25/bag in Q4. This is a sharp decline vs the Q4, beginning expectations of 0-2% decline. Regionally, the highest decline is seen in East and South markets – down ~10-12% QoQ; while prices in other regions are down 4-5% QoQ. Increasing competition intensity, in South and East, is one of the key reasons for sharp price decline.
  • Analysts of IIFL Capital Services channel checks suggest companies are trying to increase prices by Rs20-25/bag across regions (5-8%), save Central India, however these have not been implemented as yet. Dealers expect some price increase is likely, but are not confident of the sustainability given the likely demand slackness amidst upcoming Union Elections.
  • Given the sharp decline in cement prices, analysts of IIFL Capital Services estimate, Ebitda/t for the industry could decline by Rs200/t (Q3 profitability was Rs1150/t). This could effectively result in a 3-5% cut in FY24 Ebitda. Although companies are starting FY25 on a weak note, with the expected price increase, prospects would improve.
  • With the impending elections in Q1 and monsoons in Q2, cement demand could see some moderation. But, with the current government most likely continuing, the focus on infrastructure spends and affordable housing should remain intact; driving cement demand over the medium term. Thus analysts of IIFL Capital Services maintain their positive view on the sector and BUY on UltraTech Cement, Dalmia Bharat and JK Lakshmi.

Related Tags

  • Cement
  • Q4
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