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Cement prices flat MoM in January; trend likely to continue in Q4: IIFL Securities

6 Feb 2023 , 11:09 AM


  • All-India average cement price was flat MoM in January 2023. Regionally, marginal increase was seen in Central (+1.6%) and West (+1.1%) markets, while prices in South and East markets declined by 1.5% each — followed by ~1% fall in North.
  • Compared to Q3 average prices, highest decline is seen in southern markets (down 5.4% QoQ), followed by eastern markets (down 1.8% QoQ). Analysts at IIFL Securities note that these two regions also saw the highest increase in Q3, based on their dealer checks — and to that extent — there is some price normalization. Price hike in other regions varies from 1-2% QoQ.
  • Per channel checks, commentary on pricing remained underwhelming for the February 2023, as prices remained steady in first week and no further price hike intimations have been received from the companies. In the earning calls too, management commentary on expected increase in prices is subdued.
  • Demand in January month is likely to decline MoM, impacted due to higher inventory levels in secondary market, cold weather conditions, festive period, etc. However, demand is expected to pick up, given government’s thrust on infrastructure. In the Budget 2023, government has raised its targeted capex spend for FY24 by 30% YoY versus FY23RE, which augurs well for the overall cement demand. Pre-election spending is also likely to drive volumes in FY24. Rural demand is expected to recover on remunerative crop prices and better Kharif harvest. UTCEM, the largest player, has guided to achieve 95%-100% utilizations in Q4.
  • Despite subdued outlook on price increases in Q4, analysts at IIFL Securities expect sector profitability to improve sequentially in Q4FY23, driven by higher volumes (operating leverage benefits) and likely cost moderation (lower fuel prices + efficiencies). 
  • Analysts at IIFL Securities have maintained their positive stance on the sector; their preferred picks in the sector are UltraTech Cement, Dalmia Bharat, JK Cement, ACC, and JK Lakshmi.

Related Tags

  • ACC
  • Cement
  • Dalmia Bharat
  • India cement
  • JK Cement
  • JK Lakshmi
  • Ultratech Cement
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