Cement June

8/6/2019 Cement June

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Continued disappointment in demand has led to further decline in cement

prices over the month. Except South, prices in all regions corrected sharply in

the INR 5-50/ bag range. Compared to peak prices in March 2011, currentprices are down in the INR 5-60/ bag range. The irony is that the region with

the lowest capacity utilisation (South) has the highest prices while regions

with high capacity utilisation (Central/East/ West) have the lowest prices.

Region-wise summary

We surveyed 29 cities across India to get a region-wise demand and price trend in

both trade and non-trade categories. Key highlights of the same are as below:

North: Prices correct on low demand

With no recovery in demand, prices have corrected in the INR 5-45/bag range

over the month. The highest price correction of INR 45/bag was in non-trade

prices in Gurgaon. With the gap in trade and non-trade prices (INR 30-40/bag)

widening, continued low demand can put further downward pressure on prices

in the trade segment.

East: Corrections galore

Prices in the region have corrected in the ~INR 10-35/bag range compared with

the previous month. From the peak in March 2011, current prices in the region

are down INR 15-40/bag with highest correction in non-trade prices in Kolkata.

Lowest prices currently are in Raipur/Durg cities of Chhattisgarh (INR 175-

185/bag compared to INR 215-230/bag in March 2011). Dealers expect further

declines with the onset of monsoon in the region.

South: Highest price levels

While prices have corrected by ~INR 5/bag in Chennai and Hyderabad over the

month, they are still a tad higher compared to March 2011. Current prices in the

region are the highest in the country despite the lowest capacity utilisation of

~60%.

West: Free fall in Gujarat

A drop in demand and increased supplies has led to a sharp correction in prices

in Gujarat. Compared to the previous month, non-trade prices in Ahmedabad

and Surat dipped ~INR 50/bag. Current non-trade prices in these cities (INR

190-200/bag) are down INR 50-60 compared to peak of March 2011. Dealersexpect some more pain in the coming weeks. Maharashtra too has witnessed

price declines of INR 5-30/bag, with highest correction in Nagpur. Further

declines are expected.

Central India: No respite

Compared to the previous month, prices in the region are down INR 5-25/bag;

compared to March 2011, they are down INR 20-45/bag. The pace of price

declines has slowed down in the past week and dealers believe that prices have

bottomed out from a near-term perspective.

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Navin Sahadeo

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Prasad Baji

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Sanjiv Chandwani

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India Equity Research | Cement Monthly Update

CEMENT

Prices succumb to low demandJune 10, 2011


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Edelweiss Securities Limited 3

Cement

Table 2: Price trend in North

Source: Edelweiss research

Region- North

City Comment Trade Non-trade Trade Non-trade

Prices in the trade category have

corrected by ~INR 5/bag and in non-

trade segment ~INR 15/bag.

Low demand growth.


corrected by ~INR 18-22/bag and in

non-trade segment ~INR 20-

25/bag.

Demand growth continues to

disappoint on account of non-

availability of labour.



non-trade segment ~INR 45/bag.

Gap between trade and non-trade

has widened. Expect sharp decline

in trade prices.

Demand is better compared to May

2011.

Prices have corrected by ~INR

10/bag in trade and ~INR 20/bag in

non-trade segment.

No pick up in demand yet.



non-trade segment.

Sluggish demand growth.

Prices have corrected by ~INR 5-

10/bag in trade and by ~INR 5/bag

in the non-trade segment.

236-250 230-240

Demand is low.



non-trade segment.

Demand is better compared to May

2011.


5/bag in trade and non-trade

segments.

Demand growth flat but is expected

to pick up.

230-235 245-255 235-240

225-230 260-265 245-250

225-235

Amritsar

230-240 275-285 245-255

260-265 295-300 275-280

230-240 290-300 260-270

290-295

270-280

250-255

230-240

230-235 260-270

240-250

Jaipur

Jodhpur

Sri-Ganganagar

238-252

260-275

270-280

Jalandhar

Ludhiana

Delhi 250-260

220-230Gurgaon 280-290 265-275

INR/50 kg bag

Recent

trend

Expected

trend

As on June 10, 2011 As on May 09, 2011


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4 Edelweiss Securities Limited

Cement

Table 3: Price trend in East


Region- East INR/50 kg bag


Prices have dipped by ~INR 10-15/bag

in the trade and ~INR 20/bag in non-

trade segment.

Demand growth remains low. Arrivals

from other regions continue to be high.

Prices have corrected by ~INR 10/bag

in the trade and ~INR 15-20/bag in the

non-trade segment.

Demand continues to be sluggish.


30/bag in the trade and ~INR 25-

35/bag in the non-trade segment.

Demand growth has slowed down.

Prices have corrected by ~INR 25/bag

in the trade and ~INR 20/bag in the

non-trade segment.

Dealers convey tapered demand

growth.


20/bag in trade and by ~INR 25/bag in

the non-trade segment.

205-215 200-210


Raipur

250-270

185-200 210-220 205-215

230-265

190-195 175-185

210-230 260-280 235-265

230-250 255-295

Bhubaneshwar

Kolkata

Patna

Durg 200-210

230-270

As on June 10, 2011 As on May 09, 2011 Recent

trend

Expected

trend

200-235 230-270 220-255220-255


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Cement

Table 4: Price trend in South


NA: Not available

Region- South


No change in prices. Brands like

Chettinad and Dakshin Cement are

selling at low price of ~INR 260/bag.

270-285 270-285 270-285 270-285

Demand growth continues to be slow.

Prices have corrected by ~INR 5/bag in

trade and non-trade segment.

265-270 250-260 270-275 255-265

Demand growth continues to be slow on

account of low sand availability.

Prices have increased by ~INR 20/bag

in trade segment for B grade brands.

The hike is basically the reversal of high

discounts these brands were offering to

push volumes.

Demand is yet to pick up.

Demand is sluggish.

Price have corrected by ~INR 5-10/bag

in the past few days, reversing the hike

taken in mid-May 2011. Current prices

are flat compared to May 9, 2011.

Recent

trend

Expected

trend

INR/50 kg bag


Bangalore

255-270 245-255

270-315 NA

255-270

290-315 NA

245-255Hyderabad

Cochin

Chennai


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Cement

Table 5: Price trend in W est


Region- West


Prices in the trade segment have


trade segment by ~INR 45-50/bag.

220-228 190-195 250-260 240-250

Even A grade players are getting

aggressive in the non-trade segment.

Demand continues to remain low.


corrected by ~INR 5-10/bag and in non-

trade segment by ~INR 5/bag.

270-285 260-270 280-290 265-275

Muted demand growth.




Demand is better as compared to May

2011

Prices have remained flat due to

shortage of material in the market on

account of labour strike.

Prices, at best, will stay flat or decline

as we enter the monsoon season.

Demand in June is seen better over May

2011.




270-275 245-255 282-287 262-272

Small quantities like 500 bags are also

being sold under non-trade in few

instances.

Demand is not encouraging.



non-trade segment by ~INR 45-50/bag.

Demand is low.

No surprise if prices fall further since all

players are getting aggressive with

volumes.


INR/50 kg bag

Expected

trend

Recent

trend

Ahmedabad

Nagpur

Nasik

Mumbai

Pune

Surat

260-270 215-235 270-283 255-265

270-290 255-265 275-290 255-265

235-240 200-205 250-260 245-255


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Cement

Table 6: Pri ce trend in Central


Region- Central


Prices have dipped by ~INR 20/bag in

trade and non-trade segments.

Demand growth continues to be flat.


in trade and non-trade segments.

Ban on construction activities continue

on account of water shortage.



in the trade and ~INR 20/bag in non-

trade segment.

Flat demand growth.


25/bag in the trade segment and by

~INR 20/bag in the non-trade segment.

C grade brands are selling at lower

prices of ~INR 190/bag.

Demand has improved in the past few

days.




220-230 210-215 245-250 225-230

Demand has picked up a bit.




Demand has improved marginally

215-230 210-220 230-240 225-235

260-265

220-230 200-210 235-255 220-230

240-245

INR/50 kg bag

Expected

trend

Recent

trend


240-250245-270230-245235-255

Allahabad 225-230 210-215 245-250 230-235

Lucknow

Kanpur

Ghaziabad

Bhopal

Indore

245-255 220-225


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Cement

Chart 2: Price trend in Northern region Chart 3: Price trend in Southern region

Chart 4: Price trend in Eastern region Chart 5: Price trend in Western region

Chart 6: Pri ce trend in Central region


200

218

236

254

272

290

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

(INR/50kg

bag)

Delhi Jaipur

200

220

240

260

280

300

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

(INR/50kgbag)

Kolkata Bhubaneshwar

180

204

228

252

276

300

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

(INR

/50kgbag)

Lucknow Bhopal

120

160

200

240

280

320

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

(INR/50kg

bag)

Chennai Hyderabad

170

196

222

248

274

300

Nov-07

Feb-08

May-08

Aug-08

Nov-08

Feb-09

May-09

Aug-09

Nov-09

Feb-10

May-10

Aug-10

Nov-10

Feb-11

May-11

(INR/50kgbag)

Mumbai Ahmedabad


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Cement

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Cove r age g r oup ( s ) o f s t ocks by p r im a r y ana lys t ( s ) : Cement

ACC, Ambuja Cement, Grasim Industries, India Cements and UltraTech Cement

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Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 118 51 17 189

* 3 stocks under review

Market Cap (INR) 111 61 17

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to

30-May-11 ShreeCement

Power segment springs apositive surprise;Result Update

1,832 Buy

30-May-11 IndiaCements

No positive triggers insight; Result Update

84 Reduce

24-May-11 ShreeCement

Value play;Initiating Coverage

1,885 Buy

12-May-11 Grasim Cementing gains;Result Update

2,306 Buy

800

950

1,100

1,250

1,400

3-Jun-10 3-Dec-10 3-Jun-11

EW Construction Material Index Nifty

Documents

Cement June