The Centre’s infrastructure push, a pick-up in real-estate demand and industry consolidation have helped drive pan-India cement prices by around 4% in the first week of March. Prices climbed around 18% in the south and 11% in the west.
“Companies are more concerned about incremental volumes. So, the announcement of large price hikes in the coming days could be just to push more volume at existing rates,” said Binod Modi, research analyst, Reliance Securities.
Demand remained firm as continued traction in infrastructure building, affordable housing and rural consumption drove volumes, Modi added.
The cement industry is beginning a new cycle, said a report by Morgan Stanley on Wednesday.
“The current cycle should be supported by both pick-ups in the CAPEX cycle and upturn in the housing industry. We expect cement demand to increase at a CAGR of 9% over F21-23 (in line with real GDP growth) and believe that demand could surprise positively,” the said analysts Gaurav Rateria and Mukund Sarawogi in a report by Morgan Stanley.
While the West and East saw average price hikes of Rs10-20/bag, prices rose by Rs5-15/bag in North and Central regions and Rs20-30/bag in South. Dealers indicate companies may announce further hikes in the coming days to ensure the sustainability of the current increases, given year-end pressures to achieve volume targets, said
in a sector research report on Tuesday.
On a year-on-year basis, Q4 FY21 prices are up 15% in South, 8% in West, 2-3% in North / Central regions and are still down 3% YoY in East.
Except for the South, dealers expect prices to sustain in other regions.
Price increases are also attributed to an increase in input and logistics cost.
“Petcoke prices are up 6% QoQ, international coal prices are up 48% QoQ and average diesel prices are up 9% QoQ,” said Devesh Agarwal, a research analyst from IIFL in a report on Monday.
The strong demand momentum could offset the impact of subdued prices. We maintain our positive stance on the sector, he added.
Analysts expect the cement sector to post strong earnings growth at more than 30% YoY in Q4 of FY 2021.
“Industry likely to post highest-ever quarterly volumes of around 105mnte (our estimate) with 20-22% YoY growth during Q4FY21E implying ~85% pan-India utilisation,” said the ICICI Report.
Morgan Stanley has raised FY 23 earnings estimates up to 13%, driven by better realization/margin assumptions, and are 4-15% ahead of consensus.