By Emkay Research
Average Pan-India cement prices have declined by 1% month-on-month (Rs 4/bag) in Dec-22, after witnessing gradual price-hikes for the past three months. Prices declined by 2% m-o-m in the East and South, while staying largelyflat in other regions, in Dec-22. In Q3FY23, all-India average cement prices increased by 2-2.5% (Rs 8-10/bag) on y-o-y and q-o-q bases.
Industry volumes are likely to have been flat-to-marginally positive y-o-y and m-o-m in Dec-22. In Q3FY23, volumes are expected to have increased by 7-8% y-o-y, led by a favourable base and strong infra push by the government, with the East and South leading regionally.
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Cement companies are attempting price hikes of Rs 10-20/bag across regions, in Jan23. Absorption of such hikes will be revealed over the next few days. We expect the industry’s profitability to increase by around Rs 200/ton q-o-q in Q3FY23, led by higher cement prices along with peaking-out of operating cost in Q2FY23.
Post gradual price hikes for the past three months, average Pan-India cement price is likely to have declined by 1% m-o-m (Rs 4/bag) in Dec-22. Prices in the North and West are likely to have stayed flat q-o-q, while possibly declining by 2% q-o-q in the central region.
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Volumes in Oct-22 were impacted by the festival season. However, they picked up pace in Nov-22 and are expected to have increased by 7-8% y-o-y in Q3FY23. We expect demand momentum to improve, with a busy construction season and as pre-election spending kicks in. Volume growth will be 10-11% y-o-y in 9MFY23, in our view.
We expect demand to further pick up (from mid-Jan ’23) after Kharmas (considered an inauspicious period in India), which should bode well for pricing.