Cement

Sector Update | 10 April 2017

Cement

April 2017 North India prices ~3%

higher on MoM basis (INR/bag)

Price hikes across regions in April 2017

Pricing remains strong in North, recovers sharply in South

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Price hikes of INR20/bag initiated in most parts of North India on the back of stable

volumes and lower supply addition.

Sharp price hikes in Southern markets to restore price decline witnessed in 4QFY17.

East India has seen price hikes of INR20/bag.

All India average realization for the month of April 2017 is up 4% MoM due to price

hikes across regions, particularly the North and the South.

Strong price hikes across regions; North seeing structural improvement in

pricing environment

All India prices rose by ~4% MoM to INR300/bag, led by price hikes in most regions,

particularly the South, the North and the East. While the price hikes of INR30-50/bag

in the South are largely to restore the decline in 4QFY17, the North has seen steady

price increase to the highest ever levels in the region. Despite supply pressure, the

East has seen a price hike of ~INR20/bag in April 2017. While exit prices of 4QFY17

were higher than the average price during the quarter, further price improvement in

April augurs well for the profitability of cement players, particularly in the North and

the South. While 4QFY17 all India pricing would be weaker by ~3% QoQ due to

subdued prices in December 2016/January 2017, strong hikes in April would result in

normalization of all India prices to 3QFY17 average levels.

Exhibit 1: Average all India Cement prices (INR/bag) for Apr-17 increase by ~4% mom

Nov-16

Dec-16

Jan-17

Feb-17

Mar-17

Apr-17

North

East

West

South

Central

Average prices

(INR/bag)

Source: MOSL

Investors

2017

advised to refer through important disclosures made at the last page of the Research Report.

10 April

are

Abhishek Ghosh

(Abhishek.Ghosh@MotilalOswal.com); +91 22 3982 5436

Abhinil Dahiwale

(Abhinil.Dahiwale@MotilalOswal.com); +91 22 3980 4309

1

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Cement

Regional trends in first week of April

North:

Cement prices in the region have increased steadily from the third week of

February 2017, led by normalization of volumes post demonetization as also limited

supply addition. Cement prices in the region have been increased by ~9% from exit

prices of December 2016, which had seen the maximum impact of demonetization.

Demand in late March and early April was driven by the IHB segment. Additionally,

as no major capacities are likely to come in the region post the JK Lakshmi Udaipur

unit, we expect pricing improvement to be highest in the region.

Exhibit 2: April 2017 North India prices ~3% higher on MoM basis (INR/bag)

North India average prices (INR/bag)

295

280

Nov-16

Dec-16

287

296

298

306

Jan-17

Feb-17

Mar-17

Apr-17

Source: MOSL

Central:

Prices in the Central region are largely flattish in April 2017 on MoM basis.

However, our market surveys suggest that prices could be increased in the region by

INR5-10/bag in the next 15 days, as demand continues to be stable.

Demand in the region is likely to benefit from improved rural economy in Uttar

Pradesh and higher infrastructure spend in Madhya Pradesh due to the upcoming

election next year.

Exhibit 3: April 2017 Central India prices flat MoM (INR/bag)

Central India average prices (INR/bag)

301

281

Nov-16

Dec-16

290

298

306

306

Jan-17

Feb-17

Mar-17

Apr-17

Source: MOSL

10 April 2017

2

Cement

West:

Cement prices in the West have corrected marginally since February 2017 due

to weak demand from Real Estate in Mumbai/Pune. Demand was also impacted in

Gujarat due to weak demand from the retail segment following demonetization.

Exhibit 4: April 2017 West India prices see marginal increase MoM (INR/bag)

West India average prices (INR/bag)

304

288

284

274

Feb-17

273

Mar-17

274

Apr-17

Source: MOSL

Nov-16

Dec-16

Jan-17

South:

To restore the price decline in the region over January-March 2017 (4QFY17),

cement companies have raised prices sharply by INR30-50/bag. There was visible

volume push by the companies in 4QFY17.

Cement demand remains strong in Andhra Pradesh and Telangana due to irrigation

projects such as Polavaram.

Exhibit 5: April 2017 South India prices up 12% versus March 2017 (INR/bag)

Sout India average prices (INR/bag)

326

295

291

288

Feb-17

317

282

Mar-17

Apr-17

Source: MOSL

Nov-16

Dec-16

Jan-17

10 April 2017

3

Cement

East:

The region witnessed price increase of INR20/bag in April 2017. While the

quantum of hike is good, sustainability of price hikes could be difficult.

While demand trajectory remains healthy, we expect prices in the region to correct

due to commissioning of Emami’s cement new unit near Kolkata as also capacity

expansion by Shree Cement (in Bihar) and JSW Cement.

Exhibit 6: April 2017 East India prices up 3% MoM (INR/bag)

East India average prices (INR/bag)

290

279

274

Jan-17

296

286

287

Nov-16

Dec-16

Feb-17

Mar-17

Apr-17

Source: MOSL

10 April 2017

4

Cement

NOTES

10 April 2017

5

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Cement

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