Sector Update | March 2015
Please refer to our report
dated 17 February 2016
Price strength coming back in North-Central India
Downside risk to 4QFY16 estimates lower for preferred picks
Cement players (ex-South) took price hikes of INR35-70/bag in the last 30-40 days in
multiple tranches. The highest sequential uptick was in North and Central India.
If prices do not change further in March, we believe there is no major downside risk to
our 4Q price assumptions, especially for our preferred North-Central picks.
Our near-term conviction in our North-Central bets (JKLC, JKCE, PRSC) is intact. UTCEM
remains our preferred pick for the cycle.
Players took price hikes in competitive markets
INR35-70/bag increase in
retail prices in North and
Interim price corrections of
~INR25/bag in AP during
After competitive strategy resulting in dismal price trends, cement companies in
the North and Central regions took price hikes in multiple tranches since
February, with the latest increase in the first week of March.
Our channel interactions highlight that over the past 30-40 days, retail prices in
the North and Central regions have increased by INR35-70/bag from the bottom
of January 2016. Prices have increased by INR60/bag in Delhi, INR50/bag in
Jodhpur, INR70/bag in Chandigarh, and INR30-50/bag in West UP and MP
including the INR10-25/bag increase in the first week of March. Dealers in the
North are not offering any discounts.
Trends within the East and West markets have been mixed. In the East, prices
normalized early in February in Patna; recovery in Kolkata was only in the first
week of March, with INR50/bag uptick after similar fall between December and
In the West, prices increased by INR20-25/bag MoM in Gujarat and Mumbai in
February; in South-Maharashtra and Pune, prices increased by INR25-35/bag in
the second half of January and have remained range-bound since. In Pune,
competition from market leaders (tier-I brands) remains strong, keeping billing
prices INR20-25/bag lower.
In the South, there were interim corrections of ~INR25/bag in Andhra Pradesh in
early February, before gradual recovery. Prices are stable in other states.
Exhibit 1: Ex-South India, prices bounced back in the last 30-40 days (INR/bag)
Source: Company, MOSL
(Sandipan.Pal@MotilalOswal.com); +91 22 3982 5436
(Aashumi.Mehta@MotilalOswal.com); +91 22 3010 2397
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