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• March industry growth at 6.6%, 4Q recovery takes full year growth to
4.7%; capacity hits 289MT: While March y/y growth (6.6%) was lower than
in Feb. (8.2%), the Feb+March growth helped push up FY11 growth to 4.7%.
Capacity utilization hit 87%, but we would highlight that March is the strongest
month of the year for cement, and hence utilization levels tend to jump sharply.
April saw reporting only from ACC and ACEM, with no clear trend visible
(ACC+15% y/y, while ACEM -2% y/y). ACC has reported the third straight
month of +10% y/y growth, in the context of overall market growth of 5%. In
our view, how ACC and JPA increase utilizations in a macro environment of
weak cement demand will test the elevated cement pricing environment.
Industry capacity hit 289MT (FY11 capacity addition of 289MT vs total
dispatches of 209MT). Clinker closing stock as of March went down to 6.5MT,
which while still at elevated levels compared to the historical average, is sharply
lower than the level of 8.5MT seen in Dec-10. The base for cement demand
remains high until June and then drops off sharply.
• Some interesting data points on company wise dispatch growth: JPA
reported 14% y/y growth (FY11 growth of 39%). While Shree reported flat y/y
sales, Century reported +9% y/y for March-11. In the South, India Cement and
Madras Cement reported y/y decline of 1% and 12%, respectively, but Dalmia
Cement reported +30% y/y. For FY11, of the total industry volume growth of
9.3MT ( +4.7% y/y), JPA accounted for 44% (+39% y/y), followed by UTCEM
at 15% (+4% y/y), Ambuja at 13% (+6% y/y) Dalmia Cement at 6% (+14% y/y).
• Cement prices went up sharply in March but saw some correction in April:
As per our channel checks, cement prices cumulatively went up by 22% in West,
9% in South, 24% in North and 15% in East with National average cement
prices near Rs280/bag, the highest ever. In April cement prices fell by 2-5%
across many markets and, as of May, our cement dealer checks have indicated
that while prices were expected to increase, so far nothing has happened on the
ground and only North India dealers are seeing some price increases.
• State-wise consumption data: While ACC and ACEM data is not available for
state-wise comparisons, we believe state-wise data is still a good indicator for
on-the-ground demand trends, not only for cement but for other basic materials.
As has been the trend in recent months, two states, Gujarat and Maharashtra,
continue to account for a large part of the y/y growth (81% of the y/y growth in
March came from these two states). However, while not material on a y/y
basis, we are positively surprised by the sharp m/m increase in AP (m/m
+17% y/y and accounting for 9% of the industry m/m growth). AP in our
view is critical for an uplift in industry volumes. Currently the entire industry
growth seems to be essentially coming from Gujarat and Maharashtra with UP
and Rajasthan contributing the remainder. Tracking the Jan-March quarter y/y
change in consumption data for the 23 large states/regions, seven states reported
a y/y decline, seven reported +<5% y/y growth while nine reported +>5% y/y
growth, highlighting that the current cement consumption growth is not pan
India (likely getting mirrored in steconsumption data as well) , and while AP
base effect become positive at some point this year, broad-based demand
recovery looks difficult in FY12E.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
• March industry growth at 6.6%, 4Q recovery takes full year growth to
4.7%; capacity hits 289MT: While March y/y growth (6.6%) was lower than
in Feb. (8.2%), the Feb+March growth helped push up FY11 growth to 4.7%.
Capacity utilization hit 87%, but we would highlight that March is the strongest
month of the year for cement, and hence utilization levels tend to jump sharply.
April saw reporting only from ACC and ACEM, with no clear trend visible
(ACC+15% y/y, while ACEM -2% y/y). ACC has reported the third straight
month of +10% y/y growth, in the context of overall market growth of 5%. In
our view, how ACC and JPA increase utilizations in a macro environment of
weak cement demand will test the elevated cement pricing environment.
Industry capacity hit 289MT (FY11 capacity addition of 289MT vs total
dispatches of 209MT). Clinker closing stock as of March went down to 6.5MT,
which while still at elevated levels compared to the historical average, is sharply
lower than the level of 8.5MT seen in Dec-10. The base for cement demand
remains high until June and then drops off sharply.
• Some interesting data points on company wise dispatch growth: JPA
reported 14% y/y growth (FY11 growth of 39%). While Shree reported flat y/y
sales, Century reported +9% y/y for March-11. In the South, India Cement and
Madras Cement reported y/y decline of 1% and 12%, respectively, but Dalmia
Cement reported +30% y/y. For FY11, of the total industry volume growth of
9.3MT ( +4.7% y/y), JPA accounted for 44% (+39% y/y), followed by UTCEM
at 15% (+4% y/y), Ambuja at 13% (+6% y/y) Dalmia Cement at 6% (+14% y/y).
• Cement prices went up sharply in March but saw some correction in April:
As per our channel checks, cement prices cumulatively went up by 22% in West,
9% in South, 24% in North and 15% in East with National average cement
prices near Rs280/bag, the highest ever. In April cement prices fell by 2-5%
across many markets and, as of May, our cement dealer checks have indicated
that while prices were expected to increase, so far nothing has happened on the
ground and only North India dealers are seeing some price increases.
• State-wise consumption data: While ACC and ACEM data is not available for
state-wise comparisons, we believe state-wise data is still a good indicator for
on-the-ground demand trends, not only for cement but for other basic materials.
As has been the trend in recent months, two states, Gujarat and Maharashtra,
continue to account for a large part of the y/y growth (81% of the y/y growth in
March came from these two states). However, while not material on a y/y
basis, we are positively surprised by the sharp m/m increase in AP (m/m
+17% y/y and accounting for 9% of the industry m/m growth). AP in our
view is critical for an uplift in industry volumes. Currently the entire industry
growth seems to be essentially coming from Gujarat and Maharashtra with UP
and Rajasthan contributing the remainder. Tracking the Jan-March quarter y/y
change in consumption data for the 23 large states/regions, seven states reported
a y/y decline, seven reported +<5% y/y growth while nine reported +>5% y/y
growth, highlighting that the current cement consumption growth is not pan
India (likely getting mirrored in steconsumption data as well) , and while AP
base effect become positive at some point this year, broad-based demand
recovery looks difficult in FY12E.
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