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MOSL: CEMENT-Muted price hikes-quarter strong, but off a low base; All-India prices up 2% QoQ

CEMENT: Muted price hikes; quarter strong, but off a low base; All-India prices up 2% QoQ, led by central and east regions

 

• All-India cement prices are higher by 2% QoQ in QTD January-March 2018, led by price hikes in the central and east regions. Prices in the west are also higher QoQ, with exit prices in the Gujarat markets higher than average prices in 3QFY18.
• Higher prices QoQ in QTD January-March 2018 can be attributed to a low base (realizations for our coverage universe had declined 3% QoQ in 3QFY18). This is indicative of the weak pricing trends over the last six months.
• Demand continues to be healthy on a YoY basis, led by healthy demand from the infrastructure segment and a favourable base of demonetization in selected regions. We expect strong demand growth in 4QFY18, particularly driven by the south, central and east regions.
• We note that cost curve has continued to deteriorate due to higher diesel, petcoke and coal prices, as well as an increase in import duty of petcoke.
• QoQ margins of north and south players could come under pressure from subdued prices, cost push, and higher sales to the non-trade segment.