As a result, the all-India average price during April-May 2024 was marginally up (1%) compared to March 2024-exit, while it was ~1% lower than the 4QFY24 average.
After slow growth in April 2024, cement demand improved in May 2024. We estimate cement volumes to grow by ~5-6% on a monthly basis in May 2024.
Cement demand is expected to remain subdued in the near term due to the onset of monsoon in the next few weeks. However, supported by the housing and infrastructure segments, demand should bounce back strongly in the second half of FY25.
We estimate industry volumes to grow ~5-6% yoy in H1FY25, followed by ~8-9% yoy in H2FY25.
Recently, the newly formed government announced the construction of additional 30 million rural and urban houses under the Pradhan Mantri Awas Yojana.
We believe this initiative is very positive for the cement industry, as the government is focusing on affordable housing and development.
However, in June 2024 dealers have suggested that industry players have announced price hikes of Rs 8-10 per bag across various regions. In some markets (Rajasthan, Uttar Pradesh and West India), non-traded prices have increased by Rs 15-30 per bag, reducing the price gap between traded and non-traded.
However, we will keep an eye on the sustainability of these price hikes given the onset of monsoon across the country in the next few weeks. Cement prices have increased by Rs 10 per bag in June 2024 in the eastern, western and central regions.
In contrast, in the northern and southern markets, prices have increased by Rs 8-9 per bag during the month. As a result, the all-India average cement price has increased by ~3% monthly in June 2024 (so far).
Considering the increase in cement prices in June 2024, the all-India average cement price is expected to remain stable quarter-on-quarter in 1QFY25 (QTD). In contrast, cement prices in the northern, eastern and southern regions are expected to decline by ~1-2%.
Further, domestic petcoke price declined by 6% month-on-month to Rs 12,439/tonne in June 2024 and imported petcoke price declined by ~3% month-on-month to $107/tonne (spot basis).
However, the price of imported coal (South Africa) remained stable at $109 per tonne on a monthly basis. Based on spot prices, the consumption cost stood at Rs 1.28 per kcal for imported petcoke and Rs 1.63 per kcal for imported coal.
It is noteworthy that considering the time taken in shipment and transit of coal (including loading and unloading), the spot price reaches consumption zone after about four to five months.
Hence, the benefit of reduced fuel prices is expected to accrue from Q3 FY25. Industry players anticipate that fuel costs will gradually come down over the next few quarters given the availability of fuel.
JK Cement: BUY | LTP Rs 4328 | Target Rs 5300 | Upside 22% | Time 1 year
JKCE has shown robust volume growth driven by capacity expansion and strong execution. Capacity expansion plan and grinding facility at Panna are on track, which is likely to be commissioned in Q2FY26.
The management highlighted potential cost reductions over the next two-three years, driven by savings in logistics, power and fuel, and other fixed costs.
Birla Corporation: BUY | LTP Rs 1575 | Target Rs 1800 | Upside 14% | Time 1 year
Consolidated EBITDA and OPM jumped. Capacity utilisation of Mukutban unit improved. Currently, BCORP is focusing on adding grinding capacity, while clinker expansion is likely to happen by FY27.
The company expects state incentives for the Mukutban plant to start flowing in as early as FY 2025. Operations at the Bikram coal mine are likely to begin in the second quarter of FY 2025.
(The author is Head of Retail Research at Motilal Oswal Financial Services Ltd)
,Disclaimer: The recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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