MOSL: CEMENT-FY19 cement demand outlook for south India appears promising
CEMENT: FY19 cement demand outlook for south India appears promising; Prices likely to remain muted due to sub-optimal utilization
- Cement demand in south India has increased at a muted CAGR of 1% over FY12-18 due to weak demand in Andhra Pradesh (AP)/Telangana and Tamil Nadu (TN). However, demand has picked up well in 2HFY18 owing to strong growth in AP/Telangana and a revival in TN.
- We expect cement demand in south to increase at ~9% YoY in FY19, led by strong growth in AP/Telangana and a moderate revival in TN due to a better monsoon season and a favourable base.
- TN's contribution to overall south demand has declined consistently from ~31% to ~25% over FY12-18. This has impacted the south-based players, as realizations are much better in TN than in AP/Telangana.
- Cement realizations in south declined ~7% in 9MFY18 from the peak levels of 2016. Improvement in FY19, too, is expected to be limited, with the region's utilization levels at sub-60%.
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