By Rohit Sharma
The cement price in south and east India has increased by Rs 5 a bag to Rs 362 a bag and Rs 332 a bag in March 2019 and in north and central regions, prices declined by Rs 3-11 a bag while the west region saw a price decline of Rs 1 a bag, showed channel check survey by Kotak Institutional Equities.
There is a sharp increase in the past two months, prices in South markets are now Rs 30 a bag higher than 3QFY19 average, followed by Rs 9 a bag increase in the west region.
“After the recent increase, South prices are at a premium of Rs 30-50 a bag to other regions—but South markets still have the lowest plant utilizations across all regions”, Kotak said in the statement.
Kotak further added, as per DIPP data, industry volumes increased by 11% YoY to 30 mn tons in January 2019—we note that strong volume growth was despite a high base (20% volume growth in January 2018) through 3-year CAGR works out to 5% (this accounts pre-demonetization year as base year, i.e. January 2016). For April 2018-January 2019, cement production volumes increased by 14% YoY to 276 mn tons. Management narratives indicate strong demand from the infrastructure sector even though demand from the trade segment is relatively subdued.
We maintain a cautious stance on the cement sector on expensive valuations and on an expectation of moderate improvement in earnings over the next 2 years. We believe large capacity addition will keep industry utilizations low (<72%) over the next 2 years and will cap the overall improvement in profitability, it said.
Region-wise cement price trend for March 2019
} Cement prices in the North declined by Rs 3/bag to Rs 306/bag in March 2019—prices have declined post Rs 9/bag increase in the previous two months. Prices were steady in Rajasthan but declined by Rs 5-10/bag in Haryana, Himachal Pradesh and Delhi.
} Cement prices in the Central region declined by Rs11 /bag to Rs 328/bag. As per our channel checks, prices declined by Rs 15/bag in Madhya Pradesh and by Rs 8-10/bag in Uttar Pradesh.
} Cement prices declined in the West region during the month by Rs 1/bag to Rs3 14/bag. Per our checks, prices declined by close to Rs 15/bag in Gujarat in cities such as Ahmedabad, Baroda, Surat while increased by Rs 5-10/bag in Maharashtra.
} Cement prices increased by Rs 5/bag on average in the South region to Rs 362/bag. Prices increased by Rs 5/bag in Andhra Pradesh and Tamil Nadu and by Rs 10/bag in Karnataka.
} Cement prices in the East increased by Rs 6/bag to Rs 332/bag in March 2019. Our checks indicate that prices increased by Rs 5-15/bag in states of Odisha and West Bengal but declined by Rs 5/bag in North-East states.