Please Share:: 
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Hard Hat
Feb demand recovery driven by very few states
• Feb dispatch recovery too early if recent trend has been reversed: Industry
dispatches as per our estimates stood at 18.5MT, up 8.2% y/y. While this is
positive given the very weak growth trends since June-10, we believe it is too
early to say if the recent trend of demand weakness is behind us for two reasons:
a) long steel prices have not seen any sharp increase indicating that there is not
yet a very broad based demand recovery on the ground; and b) our recent
cement dealer checks indicate the on-ground demand has weakened again after
the spurt in February. Capacity creep up was 1.4MT taking industry capacity to
282MT. In terms of growth, ACC +17% y/y, ACEM + 4.7% y/y, UTCEM
+6.5% y/y, JPA +27% y/y , while South based companies had a mixed picture.
Reported clinker inventory stood at 7.46MT which in our view remains
uncomfortably high.
• State wise consumption break down–what has driven improvement over the
last two months: Analyzing the state wise end consumption data (sans ACC and
ACEM), AP remains weak (recently there were announcements of low cost
housing schemes re-starting, however this does not seem to have translated into
on-ground demand). WB accounted for 31% of incremental demand growth over
Jan-Feb (pre election spending possibly), while Rajasthan has also seen a spurt
in demand (33% of incremental demand against a normalized share of ~6%).
Gujarat, Maharashtra and UP were the other strong states. However, demand in
other key consuming markets like NCR, South India, Eastern India remained
weak and was down y/y, implying that the recent improvement is not driven by
new projects
• JPA- Can it repeat in FY12E what it did in FY11, and if it does what would
be the implications in terms of market share and pricing: JPA (N) has YTD
accounted for 50% of incremental industry growth. Its ability to gain market
share in new markets has been impressive. With YTD dispatches at 13.3MT,
JPA is on track to hit its ~16MT target for FY11. YTD JPA’s dispatch share has
increased to 7.1% v/s 5.2% YTD FY10 in sync with the capacity increase. JPA
expects to increase dispatches by a similar growth rate (~37%) in FY12E, while
we estimate over all industry growth rate of 15MT (~7%). This means for JPA to
grow dispatches by ~37%, it would result in them again cornering nearly 50% of
the expected market growth in FY12E. With all other players sitting on surplus
capacity, for cement prices to sustain, we believe market share changes would
need to continue in the cement market.
• Cement prices near record highs in most markets, recently some pressure
building up: Cement prices increased in most markets by Rs5-35/bag over Febearly
March with the sharpest increases seen in Central and Western India.
These price increases are significantly ahead of cost pressures and should result
in strong EBITDA/MT expansion (even as volume growth remains tepid) in the
March quarter and possibly even in the June quarter. However, March demand
has not been very strong, and given that this is the last month of the financial
year for many companies, there is an element of channel stuffing. This should
result in some pull back in cement prices in April as well as weak dispatches.
Given the recent run up in stock prices (UTCEM/ACEM up ~25% in last 1
month), we would look to take some money off the table here.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Hard Hat
Feb demand recovery driven by very few states
• Feb dispatch recovery too early if recent trend has been reversed: Industry
dispatches as per our estimates stood at 18.5MT, up 8.2% y/y. While this is
positive given the very weak growth trends since June-10, we believe it is too
early to say if the recent trend of demand weakness is behind us for two reasons:
a) long steel prices have not seen any sharp increase indicating that there is not
yet a very broad based demand recovery on the ground; and b) our recent
cement dealer checks indicate the on-ground demand has weakened again after
the spurt in February. Capacity creep up was 1.4MT taking industry capacity to
282MT. In terms of growth, ACC +17% y/y, ACEM + 4.7% y/y, UTCEM
+6.5% y/y, JPA +27% y/y , while South based companies had a mixed picture.
Reported clinker inventory stood at 7.46MT which in our view remains
uncomfortably high.
• State wise consumption break down–what has driven improvement over the
last two months: Analyzing the state wise end consumption data (sans ACC and
ACEM), AP remains weak (recently there were announcements of low cost
housing schemes re-starting, however this does not seem to have translated into
on-ground demand). WB accounted for 31% of incremental demand growth over
Jan-Feb (pre election spending possibly), while Rajasthan has also seen a spurt
in demand (33% of incremental demand against a normalized share of ~6%).
Gujarat, Maharashtra and UP were the other strong states. However, demand in
other key consuming markets like NCR, South India, Eastern India remained
weak and was down y/y, implying that the recent improvement is not driven by
new projects
• JPA- Can it repeat in FY12E what it did in FY11, and if it does what would
be the implications in terms of market share and pricing: JPA (N) has YTD
accounted for 50% of incremental industry growth. Its ability to gain market
share in new markets has been impressive. With YTD dispatches at 13.3MT,
JPA is on track to hit its ~16MT target for FY11. YTD JPA’s dispatch share has
increased to 7.1% v/s 5.2% YTD FY10 in sync with the capacity increase. JPA
expects to increase dispatches by a similar growth rate (~37%) in FY12E, while
we estimate over all industry growth rate of 15MT (~7%). This means for JPA to
grow dispatches by ~37%, it would result in them again cornering nearly 50% of
the expected market growth in FY12E. With all other players sitting on surplus
capacity, for cement prices to sustain, we believe market share changes would
need to continue in the cement market.
• Cement prices near record highs in most markets, recently some pressure
building up: Cement prices increased in most markets by Rs5-35/bag over Febearly
March with the sharpest increases seen in Central and Western India.
These price increases are significantly ahead of cost pressures and should result
in strong EBITDA/MT expansion (even as volume growth remains tepid) in the
March quarter and possibly even in the June quarter. However, March demand
has not been very strong, and given that this is the last month of the financial
year for many companies, there is an element of channel stuffing. This should
result in some pull back in cement prices in April as well as weak dispatches.
Given the recent run up in stock prices (UTCEM/ACEM up ~25% in last 1
month), we would look to take some money off the table here.
No comments:
Post a Comment