Over the month, delayed monsoons and supply shortage has helped an unexpected cement price rise of INR5-INR55 per bag across regions. However, with the onset of monsoons, prices are expected to soften in North, Central and West regions, and remain nearly flat in South and East. While we maintain that prices could decline sharply during monsoon (like in past two years), no correction or below-expected correction may pose upside risks to our FY13/CY12 earnings estimates.
Industry despatches for June 2012 estimated to rise ~8 -10% YoY
Industry despatches for June 2012 are expected to rise ~8-10% YoY. Despatches for cement majors (ACC, Ambuja and Shree Cement combined) have grown at 9.7% YoY. UltraTech and JP Associates have not yet reported their June 2012 despatches.
We surveyed 29 cities across India to get region-wise demand and price trend in both trade and non-trade categories. Key highlights are as follows:
North: Onset of monsoon may cause price dip
Cement prices have increased by ~INR5-45/bag in the trade segment and by ~INR15-55/bag in non-trade across the region compared with prices on June 19, 2012. Majority of the dealers mentioned shortage of cement as the primary reason for the hike. Prices, however, have started declining of late on account of low demand due to onset of monsoons. Dealers expect further decline of ~INR5-10/bag in the coming weeks.
East: Prices correct marginally; near-term flat
Compared with last month, current prices in the region have declined by ~INR5/bag in trade and by ~INR5-15/bag in non-trade, with the onset of monsoon hitting demand. However, due to current shutdown of a few cement manufacturing plants in Chhattisgarh (on account of violation of pollution control norms), prices are expected to remain flat in this state and in nearby regions like Orissa, Jharkhand and West Bengal.
South: Prices to remain flat in coming weeks
Prices declined by ~INR5/bag in the trade segment and by ~INR5-15/bag in non-trade in Hyderabad and Bangalore. Prices in Chennai and Cochin have increased by ~INR5-10/bag for the trade category and by ~INR10/bag for non-trade. Dealers expect prices to remain stable in coming weeks.