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India Cement
Preliminary March sales by majors in line
• Preliminary March cement sales- No surprises: The big 4 March sales
do not point to any sharp recovery in demand. Cumulative cement
dispatches (ACC, ACEM, JPA, and UTCEM) for March stood at 9.6MT
v/s 8.3MT in March-10, implying 8.3% y/y growth. Total industry
growth should be lower than this as has been the trend in recent months,
primarily as of the above four companies. Only UTCEM has a
meaningful presence in South, which continues to see weak demand
growth. ACC reported +12.4% y/y, ACEM +6.8%, UTCEM + 2.2%,
and JPA +22.3% y/y.
• ACC continues to report strong growth, while UTCEM continues to
report sub par industry growth: Continuing the trend seen over the last
3 months, ACC reported strong growth at 12.4% y/y, while UTCEM
reported very weak growth at only 2.2%. While ACC has commissioned
some new capacities (Wadi was commissioned while ‘trial runs’ at
Chanda were also done on Nov 10), we believe the disparity in growth
primarily stems from the relative demand conditions in key markets.
UTCEM has a decent South India exposure (~22% of capacity) which
remains weak, while ACC has relatively more exposure to Central and
Eastern India which has seen strong cement consumption recently (for
more details please see our ‘India Hard Hat- Feb demand recovery
driven by very few states’ dated 31st March, 2011).
• April- how much of a slowdown has there been historically? April
generally is a weaker month than March for 2 reasons – a) real demand
growth tends to slow down, as Feb-March sees a push to finish projects
given that it is the fiscal year end; and b) March also sees some channel
stuffing by many companies in order to acheive year end targets. Last 5
years m/m decline has been between 8-10%, which came in the context
of very strong overall demand. Given that the underlying demand is still
not very strong, April dispatches would be critical for the recent cement
pricing momentum to continue.
• March quarter to be very strong given cement price increases:
Earnings season should start from 3rd week of April. We expect a strong
March quarter given the spate of cement price increases taken by
companies through Feb and March. While coal cost pressures would pick
up sharply, we believe most companies should be able to report strong
EBITDA/MT expansion q/q.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
India Cement
Preliminary March sales by majors in line
• Preliminary March cement sales- No surprises: The big 4 March sales
do not point to any sharp recovery in demand. Cumulative cement
dispatches (ACC, ACEM, JPA, and UTCEM) for March stood at 9.6MT
v/s 8.3MT in March-10, implying 8.3% y/y growth. Total industry
growth should be lower than this as has been the trend in recent months,
primarily as of the above four companies. Only UTCEM has a
meaningful presence in South, which continues to see weak demand
growth. ACC reported +12.4% y/y, ACEM +6.8%, UTCEM + 2.2%,
and JPA +22.3% y/y.
• ACC continues to report strong growth, while UTCEM continues to
report sub par industry growth: Continuing the trend seen over the last
3 months, ACC reported strong growth at 12.4% y/y, while UTCEM
reported very weak growth at only 2.2%. While ACC has commissioned
some new capacities (Wadi was commissioned while ‘trial runs’ at
Chanda were also done on Nov 10), we believe the disparity in growth
primarily stems from the relative demand conditions in key markets.
UTCEM has a decent South India exposure (~22% of capacity) which
remains weak, while ACC has relatively more exposure to Central and
Eastern India which has seen strong cement consumption recently (for
more details please see our ‘India Hard Hat- Feb demand recovery
driven by very few states’ dated 31st March, 2011).
• April- how much of a slowdown has there been historically? April
generally is a weaker month than March for 2 reasons – a) real demand
growth tends to slow down, as Feb-March sees a push to finish projects
given that it is the fiscal year end; and b) March also sees some channel
stuffing by many companies in order to acheive year end targets. Last 5
years m/m decline has been between 8-10%, which came in the context
of very strong overall demand. Given that the underlying demand is still
not very strong, April dispatches would be critical for the recent cement
pricing momentum to continue.
• March quarter to be very strong given cement price increases:
Earnings season should start from 3rd week of April. We expect a strong
March quarter given the spate of cement price increases taken by
companies through Feb and March. While coal cost pressures would pick
up sharply, we believe most companies should be able to report strong
EBITDA/MT expansion q/q.
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