The performance of Indian cement companies is likely to recover in the second half of the current fiscal, according to Jefferies as its interaction with dealers suggests bottoming out of prices and better demand scenario.
However, the brokerage still remains selective with relative and said that it prefers UltraTech Cement amongst largecaps and its midcap pick is JK Cement.
“Industry is attempting hikes every month, with Rs 10-15/bag hike targeted in Dec,” Jefferies report said. “Demand growth has moderately improved in Oct-Nov, and recovery should continue into 4Q on revival in govt capex.”
The brokerage said cement prices were flattish month-on-month yet again in November, while noting year-to-date price drop was “trailing our annual 6% decline estimates”, and 2-3% hike (Rs 9-10/bag) is needed to continue through the year to meet estimates.
“Further, we are penciling in 8-10% YoY volume growth in 2HFY25 (vs flat growth in 1HFY25), attributable to pickup in govt capex in 2H; the Oct-Nov run-rate is however, likely below this,” it said.
On costs, Jefferies noted petcoke prices in Nov inched up slightly MoM, while remaining below the $100/T level seen until Sep-24. “For 3QTD (quarter-to-date), spot average prices are lower 12%/26% QoQ/YoY,” it said.
Regionwise, while north outperformed in November even as prices were higher partly due to absence of supply in Delhi amid the ban on construction activity and movement, in central India, Lucknow/Bhopal highlighted continued pressure on pricing across construction materials including steel, they also mentioned signs of pickup in demand.
South was the only region with a decline in pricing for the dealers as it highlighted lack of demand, competition intensity, impact of rains and continuing liquidity issues affecting the overall dynamics in the region.
In the east, dealers in Kolkata and Patna highlighted that the region is witnessing a lot of volatility in pricing, given use of rate discounts amid intense competition for volumes and continuation of soft demand environment. From the west, dealers in Ahmedabad highlighted that the region is witnessing liquidity issues on account of delayed payments from infra side, as well as labour crunch on account of missing labour post festive, both resulting in soft dispatches. “Dealers across Maharashtra highlighted demand weakness given recent elections,” Jefferies said.
. Read more on Markets by NDTV Profit.The brokerage remains selective and said that it prefers UltraTech Cement amongst largecaps and its midcap pick is JK Cement. Read MoreMarkets, Notifications
NDTV Profit
