Cement prices up in September; further hikes announced for October

10 Oct 2022 , 07:07 AM

·         All-India average cement price is up by Rs6 per 50-kg bag, or 1.7% MoM in September 2022. The price increase is after 4 consecutive months of price declines. The highest price increase was seen in East with average price increasing by 6.6%, followed by South (+1.9%) and West (+1.3%). North and Central India saw flat-to-marginal decline.
 
·         For Q2FY23, all-India average cement price was down 6.1% QoQ (~Rs20/bag) — as prices had sharp decline in the earlier months. Prices in North and Central India are down by 8.5-9% QoQ, while the same have fallen by 5.7% in East. Prices in South and West are down 3-4% QoQ. Relatively-lower decline in South and East should benefit players like Dalmia Bharat, Ramco Cements, India Cements, Nuvoco, etc.
 
·         Companies have further announced price hikes in October 2022. However, sustainability of this move would be known in coming days. Based on IIFL Capital Services’ dealer checks, all-India average prices have further increased by Rs15/bag, or by 4% in October. Highest increase has been announced in Southern markets (+10%), followed by West-East (3-4%) and Central-North (1-2%).
 
·         After subdued demand in July-August, dealers’ commentary was significantly positive on the demand for September. Dealers expect 15-25% M-o-M growth in East, West and South India; while 8-12% M-o-M growth in North-Central India. Although demand is expected to remain healthy even in October, some moderation is likely due to festive holidays; as such, a more structural growth is expected from November onwards.
 
·         Although Q2 (a seasonally-weak quarter) is likely to see a sharp decline in profits (lower prices, higher costs and subdued demand), the sector is likely to see a turnaround in Q3, given the outset of peak construction period, reduction in cost pressures (domestic petcoke down 30% in 2Q) and likely price increases. With improving prospects, analysts at IIFL Capital Services maintain their positive stance on the sector

Top picks:  UltraTech Cement, ACC, Dalmia Bharat, JK Cement and JK Lakshmi

Cement price summary

Average price per 50-kg bag (Rs)	South	East	North	West	Central	All-India
Q2FY22	365	294	330	348	305	328
Q1FY22	351	324	370	372	351	354
Q2FY23	339	306	337	357	321	332
QoQ change (%)	(3.3)	(5.7)	(9.0)	(4.1)	(8.5)	(6.1)
YoY change (%)	(7.2)	3.9	2.1	2.6	5.4	1.1

Source: Industry, IIFL Research