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August offtake of large players slows: Despatches reported by the four
large firms – ACC, ACEM, UTCEM and JPA (NR) – stood at 7.77MT,
down 6% sequentially as rainfall increased in most regions across the
country. However, y/y trend remained strong with cumulative offtakes up
10%. ACC and Jaypee continued to lead the pack with sharp y/y growth of
20% and 21% respectively, while ACEM’s despatches increased 5.5% and
UTCEM lagged the large players with ~3% y/y growth. Sequentially,
players with large exposure in North India declined with ACEM down 11%
m/m and Jaypee declining 9%. While July and August dispatches have been
strong, we believe this does not (yet) indicate an improvement in underlying
demand, as July-Sept are the rainy months, and the incidence of rains in a
particular month can distort the y/y growth rates.
July despatches: One-off factors rather than underlying demand
improvement: The cement despatches for July were up nearly 11% y/y
(highest growth since Oct-10) and +2.5% m/m, lower than the monthly
despatch trend reported by the large players (the big 4 reported July volume
growth of 16% y/y and +3% m/m). In our view, the strong y/y trend in
despatches is driven by the benign base and lower rainfall y/y during July,
which led to lower disruption in construction activity. While trends reported
were strong for most players in the country, South India companies
continued their weak performace y/y, highlighting the lack of any recovery
in demand in the region. However, similar to the trend seen in the last
month, Dalmia and Chettinad were the only South India players that
reported y/y growth unlike their regional peers. Dalmia’s volumes increased
26% y/y, while Chettinad was up 4.4% y/y. Industry capacity utilization
levels improved m/m to 74% with lower utils in South India (below 70%),
followed by North India at 74%.
Interesting change in dispatch share data between April and July 2011:
Analyzing the dispatch data on a company basis indicates a sharp loss of
‘dispatch share’ between April and July for companies such as ACEM
(10.3% down to 9.3%) and UTCEM (down to 17.3% from 18.2% in May-
11), while smaller companies such as Dalmia (up from 2.2% to 2.8%) and
Chettinad (up from 1.9% to 2.6%) increased share. While some of this can
be attributed to rains in the key markets of ACEM and UTCEM, in our view,
this does not fully explain the sharp increase in the South-based smaller
companies. We will watch this trend more closely.
North and West India seeing sharp increase in consumption: Cement
consumption increased by 7% y/y and +3% sequentially in July highlighting
trends similar to despatches. However, East India was more or less flat
(+0.8% y/y) and South India continued to decline. YTD, consumption
increased 1.3% y/y.
Dealer check shows pricing pressure in August: Cement prices weakened
in August, in most markets, though the correction is more in Central India
markets than in South India. In our view, a post-monsoon demand recovery
is critical in North and Central India for prices to recover
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
August offtake of large players slows: Despatches reported by the four
large firms – ACC, ACEM, UTCEM and JPA (NR) – stood at 7.77MT,
down 6% sequentially as rainfall increased in most regions across the
country. However, y/y trend remained strong with cumulative offtakes up
10%. ACC and Jaypee continued to lead the pack with sharp y/y growth of
20% and 21% respectively, while ACEM’s despatches increased 5.5% and
UTCEM lagged the large players with ~3% y/y growth. Sequentially,
players with large exposure in North India declined with ACEM down 11%
m/m and Jaypee declining 9%. While July and August dispatches have been
strong, we believe this does not (yet) indicate an improvement in underlying
demand, as July-Sept are the rainy months, and the incidence of rains in a
particular month can distort the y/y growth rates.
July despatches: One-off factors rather than underlying demand
improvement: The cement despatches for July were up nearly 11% y/y
(highest growth since Oct-10) and +2.5% m/m, lower than the monthly
despatch trend reported by the large players (the big 4 reported July volume
growth of 16% y/y and +3% m/m). In our view, the strong y/y trend in
despatches is driven by the benign base and lower rainfall y/y during July,
which led to lower disruption in construction activity. While trends reported
were strong for most players in the country, South India companies
continued their weak performace y/y, highlighting the lack of any recovery
in demand in the region. However, similar to the trend seen in the last
month, Dalmia and Chettinad were the only South India players that
reported y/y growth unlike their regional peers. Dalmia’s volumes increased
26% y/y, while Chettinad was up 4.4% y/y. Industry capacity utilization
levels improved m/m to 74% with lower utils in South India (below 70%),
followed by North India at 74%.
Interesting change in dispatch share data between April and July 2011:
Analyzing the dispatch data on a company basis indicates a sharp loss of
‘dispatch share’ between April and July for companies such as ACEM
(10.3% down to 9.3%) and UTCEM (down to 17.3% from 18.2% in May-
11), while smaller companies such as Dalmia (up from 2.2% to 2.8%) and
Chettinad (up from 1.9% to 2.6%) increased share. While some of this can
be attributed to rains in the key markets of ACEM and UTCEM, in our view,
this does not fully explain the sharp increase in the South-based smaller
companies. We will watch this trend more closely.
North and West India seeing sharp increase in consumption: Cement
consumption increased by 7% y/y and +3% sequentially in July highlighting
trends similar to despatches. However, East India was more or less flat
(+0.8% y/y) and South India continued to decline. YTD, consumption
increased 1.3% y/y.
Dealer check shows pricing pressure in August: Cement prices weakened
in August, in most markets, though the correction is more in Central India
markets than in South India. In our view, a post-monsoon demand recovery
is critical in North and Central India for prices to recover
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