Cement Sector Check - Volatility In Prices; Demand To Revive On Back Of Pre-Election Spending: IDBI Capital

IDBI Capital Report

Our interaction with cement dealers suggests that the average cement price at all India level has increased by 2% (Rs 3-10/bag) month-on-month in Feb-23.

Region wise, price hike is maximum for South (up 3%), followed by Central region (up 2%). However, in north we notice volatility in prices and need to watch for the trend.

Energy prices have seen sharp decline, in Feb-23 average imported coal price stood at $145/tonne (6000 kilo calorie) (decreased by 15% month-on-month) and the price is one of the lowest since March 2022.

Demand is sustaining for cement industry, as per core sector data in Dec-22 (volume is up 9.1% YoY on a high base).

We expect recovery in Ebitda/tonne for cement companies in Q4 FY23E and industry Ebitda/tonne to improve by Rs 200/tonne QoQ on 10% YoY volume growth, 10% QoQ decline in fuel cost and assuming 1% QoQ price hike.

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