Monsoon in August restrains cement prices

In a report on 18, the domestic brokerage house said, “North/central markets witnessed a 2-3% month-on-month (mom) decline in prices in August 2022, while prices in west/east India remained stable. ” august. South India, on the other hand, saw prices rise by 3% in August but given the seasonal headwinds in play, higher prices are unlikely to persist.

The report pointed out that historically, cement prices have declined by about one per cent sequentially in the second quarter, while 2QFY23E has seen prices fall by 3% quarter-on-quarter so far. Priced at all India level 384 per 50 kg bag in August.

The cost of key inputs petroleum coke and coal is likely to remain high in the September quarter. Since Q2 is seasonally weak, cement makers will not be able to pass on the cost, and consequently margin compression is likely to continue. In Q1FY23, cement manufacturers underperformed on the operational front hurt by higher input costs. That said, management’s comments point to a moderation in cost inflation in the second half of the fiscal year. Similarly, the demand for cement is also likely to improve in the third quarter.

Meanwhile, analysts at Sharekhan by BNP Paribas say most cement companies have seen their stock prices rise by 10-20% in the last month. Nevertheless, their current EV/Ebitda valuation multiplier is slightly below the five-year average. EV is short for Enterprise Value. Ebitda means earnings before interest, tax, depreciation and amortization.

“We expect a healthy demand outlook for the cement sector as well as declining coal/pet coke prices to be a major tailwind for improving operating profitability,” said a report on 18 August.

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