India Cement: June dispatches by majors bring no joy; JPMorgan

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India Cement: June dispatches by majors bring no joy; On the ground
checks indicate SEVERE pricing stress in some markets - ALERT (Pinakin
Parekh, CFA)
June dispatch growth also dismal: Industry growth as reported by ACC, ACEM
and  UTCEM  cumulatively  stood  at  6.8MT,  down  2.3%  m/m  but  up  3%  y/y.
However, as has been the trend in recent months, the 3 companies reported very
different trends, with ACC reporting ahead of industry growth at 7% y/y increase,
while  ACEM  reported  a  modest  +0.6%  y/y  and  UTCEM  reported  +1.9%  y/y.
Industry dispatches in May declined 0.3% y/y to 17.8MT. The growth rate over the
last 12 months (June-10-May-11) stood at ~3%.
Severe pricing pressure  reported in some select markets: Our recent dealer
checks indicate severe pricing stress in some select markets in West India as new
supply  has  hit  the  markets.  Retail  prices  in  markets  such  as  Ahmedabad  in
Gujarat have fallen to Rs215/bag from a high of Rs265/bag reached in end March.
Worryingly there are increasing data points of new brands  hitting the markets in
Western India at a sharp discount to existing prices by Tier 1 Brands. Prices have
also declined sharply in Central India markets. Prices remain firm in most markets
of  South  India,  even  as  demand  remains  muted.  North  India  prices  have seen
relatively less pressure even as demand has not improved. Interestingly the diesel
price  increase  of  Rs3/ltr  (7%)  has  not  yet  been  passed  on  by  the  cement
companies