Cement prices in most regions in India eased in August as the monsoon picked up pace. However, South India was an exception. Latest dealers channel checks by Kotak Institutional Equities reveal that cement prices in South India have risen 13 per bag in July to August and are now 404. A cement bag weighs 50 kg.
The September quarter is seasonally weak for the cement sector as construction activities, especially in the individual housing segment, tend to remain subdued due to rains. A Kotak report said most dealers located in the south saw poorer month-on-month sales in August compared to July due to lack of credit flow, higher cement prices, heavy monsoon and slowdown in government infrastructure projects. continue to report. Dated August 18. Dealers expect demand to be under pressure in view of the delay in restarting major government projects, a key demand driver for the cement sector. This drop in prices is thus astonishing.
see full image
According to Mangesh Bhadang, analyst at Nirmal Bang Institutional Equities, the south-based cement makers saw a sharp fall in prices in May and June as compared to cement makers in other regions. “fall was around” Top to 35 per bag. At that level, it is difficult to improve EBITDA, especially with higher costs. So we have seen a price hike in the south in August.”
Simply put, after a disappointing performance in Q1FY23, primarily on the realization and operating margin front, pricing discipline among cement manufacturers in the region has kept prices at higher levels. How long these prices will last depends on whether there is a meaningful recovery in cement demand in H2FY23.
Meanwhile, the benefit of easing input cost inflation for all cement manufacturers is expected to reflect post-Q3FY23 as higher cost inventories get exhausted. Still, the pricing outlook for South-based cement makers is not very encouraging as there is high supply and high competition in the region.
“South-based cement companies have recently underperformed in other regional markets due to lower capacity utilization levels,” said Ronald Cioni, Assistant Vice President of Research, Sharekhan, BNP Paribas. However, Ramco Cements and He said India Cements outperformed others in terms of year-on-year sales volume growth for Q1FY23.
In short, unfavorable demand-supply dynamics do not bode well for companies investing in this sector.
catch all business News, market news, today’s fresh news events and breaking news Updates on Live Mint. download mint news app To get daily market updates.