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CEMENT
Segmental price differential widening
India Equity Research | Cement
Our channel checks indicate widening gap between trade and non-trade prices in North, East and West regions. We believe these are initial signs of price correction in the trade category as we approach the monsoon season. Prices have corrected by ~INR5-20/bag in the trade category and by ~ INR535/bag in the non-trade category across regions over the past one month. Cement demand was below expectation due to ban on sand mining in a few states and labour shortage owing to the harvesting season.
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 are as follows:
Navin Sahadeo
+91-22-6623 3473 navin.sahadeo@edelcap.com
Prasad Baji
+91 22 4040 7415 prasad.baji@edelcap.com
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Cement
West: Subdued demand
Prices have declined by ~INR5-16/bag in the trade category and by ~INR5-25/bag in the nontrade category across the region. Demand feedback is not encouraging. According to dealers labour shortage due to summer season has led to low demand. Further decline of ~INR10/bag is expected across region.
Dec-09
Dec-10
Aug-09
Aug-10
Aug-11
Dec-11
Oct-09
Oct-10
Apr-10
Apr-11
Oct-11
Feb-10
Feb-11
% growth YoY
Source: Company, Edelweiss research
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Feb-12
Apr-12
Jun-09
Jun-10
Jun-11
(7.0)
(%)
18.0
Cement
Chart 2: Despatch growth of major vs non-major players and cement price trend 28.2 310
18.8 9.4 288 266 244 222 200
Nov-09
Jan-10
May-10
Sep-10
Nov-10
Jan-11
May-11
Sep-11
Nov-11
Jan-12
Despatch growth for top 5 players Avg all india cement price (RHS)
INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 290-320 300-310 300-320 300-315
Chennai
295-320
270-280 295-310
275-280
May-12
Mar-10
Mar-11
Mar-12
Jul-10
Jul-11
Cochin
325-340
295-335 325-345
295-335
Hyderabad
245-260
240-250 275-290
255-265
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INR/bag
(%)
Cement
Table 3: Price trend in North Region- North
City Amritsar Comment Prices have declined by ~INR10-12/bag in the trade segment and by ~INR15-20/bag in the non-trade segment. Demand yet to see significant pick up. Current prices in the trade segment have declined by ~INR15-20/bag and by ~INR25/bag in the non-trade segment. Price decline of ~INR5/bag expected in coming weeks. Demand yet to see significant pick up. Prices have declined by ~INR17/bag in the trade segment and by ~INR10-15/bag in the non-trade segment. Subdued demand. Prices have declined ~INR15/bag in the trade segment and by ~INR20/bag in the non-trade segment. Price decline of INR5-7/bag expected in coming weeks. Demand yet to see significant pick up. Prices have declined by ~INR12-15/bag in the trade segment and by ~INR20/bag in the nontrade segment. Subdued demand. Prices in the trade segment have declined by ~INR13-14/bag and by ~INR15/bag in nontrade segment. Demand yet to see significant pick up. Prices have declined by ~INR18/bag in the trade segment and by ~INR15/bag in the nontrade segment. Demand is yet to see significant pick up. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 280-300 240-250 292-310 255-270
Delhi
245-260
235-240 265-275
260-265
Gurgaon
265-278
240-245 282-295
250-260
Jaipur
270-280
240-250 285-295
260-270
Jalandhar
290-300
250-275 305-312
270-275
Jodhpur
265-275
245-250 278-289
260-265
Ludhiana
290-300
250-265 308-318
265-280
Prices have declined by ~INR10-15/bag in the Sri Ganganagar trade segment and by ~INR35/bag in the nontrade segment. Demand is yet to see significant pick up.
265-270
230-240 275-285
265-275
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Cement
Table 4: Price trend in East Region- East
City Comment Bhubaneswar Prices have declined by ~INR10/bag in the trade segment and by ~INR15/bag in the nontrade segment. Further correction of ~INR10/bag expected. Prices in the trade category have declined by Durg ~INR5/bag. While prices in non-trade category have remained flat. Prices expected to decline by ~INR5-10/bag in the coming weeks. Demand yet to pick up significantly. Prices in the both trade and non-trade Kolkata category have remained flat. Demand yet to pick up significantly . Prices in trade category have declined by Patna ~INR10/bag and by ~INR10-15/bag in nontrade category. Prices expected to decline by ~INR5-10/bag in the coming weeks. Prices have remained flat in the trade segment. Raipur Companies have resumed sales in non-trade segment. Demand yet to pick up significantly. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 330-354 300-305 340-364 315-320
255-265
220-240 255-270
220-240
330-365
355-360 330-365
355-360
310-355
285-325 310-365
300-335
255-265 245-255
255-265
NA
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Cement
Table 5: Price trend in West Region- West
City Ahmedabad Comment Prices in trade segment have corrected by ~INR10/bag while in non-trade segment they corrected by ~INR5-15/bag. Demand yet to pick up significantly. Prices in the trade segment have declined by ~INR5/bag while in non-trade segment they have declined by ~INR5-22/bag. Demand subdued. Prices in the trade segment have declined by ~INR15-16/bag while those in the non-trade segment have declined by ~INR20-25/bag. Further decline of INR10/bag is expected. Prices have declined by ~INR10-15/bag in the trade segment and by ~INR25/bag in the nontrade segment. Demand yet to pick up significantly. Prices in the trade segment have declined by ~INR5-10/bag while in non-trade segment they have corrected by ~INR20/bag. Price decline of ~INR10/bag expected in coming weeks. Demand has improved marginally. Surat Prices in the trade segment have declined by ~INR5-13/bag while in non-trade segment they have declined by ~INR15/bag. Further decline of ~INR10/bag expected. Demand yet to pick up significantly. 285-292 260-265 290-305 275-280 INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 285-290 245-260 295-300 260-265
Mumbai
315-320
290-315 315-325
312-320
Nagpur
275-300 245-270
290-316
270-290
Nasik
295-325
260-280 310-335
285-305
Pune
300-320
280-290 310-325
300-310
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Cement
Table 6: Price trend in Central India Region- Central
City Allahabad Comment Prices have declined by ~INR5/bag in both trade and non-trade segments. Demand yet to see significant pick up. Prices have declined by ~INR5/bag in the trade segment and by ~INR5-15/bag in non-trade segment. Further decline of ~INR5-10/bag expected in coming weeks. While prices in the trade segment have largely remained flat, in the non-trade segment they have corrected by ~INR15/bag. Subdued demand. Prices have corrected by ~INR5/bag in the trade segment and by ~INR20/bag in the nontrade segment. Further decline of ~INR5-7/bag expected in coming weeks. Demand yet to see a signicant pick up. Prices in trade segment have declined by ~INR20/bag while those in the non-trade segment have declined by ~INR5-10/bag. Demand yet to improve significantly. Prices have declined by ~INR20/bag in the trade segment while those in non-trade segment have declined by ~INR5/bag. Further correction of ~INR10/bag expected. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expecte Trade Non-trade Trade Non-trade trend d trend 270-280 260-265 275-280 265-270
Bhopal
260-280
230-245 265-280
245-250
Ghaziabad
270-280
245-250 270-278
260-265
Indore
270-280
240-245 275-285
260-265
Kanpur
270-310
250-260 290-310
255-270
Lucknow
280-305
275-280 300-305
280-285
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Cement
Chart 3: Price trend in North 295
276
(INR/50 kg bag)
Aug-09
Aug-10
May-09
Nov-09
May-10
Nov-10
May-11
Aug-11
Nov-11
Delhi
Jaipur
May-12
Feb-10
Feb-11
Feb-12
Chennai
Hyderabad
(INR/50 kg bag)
(INR/50 kg bag)
Aug-09
Aug-10
Aug-11
Aug-09
Aug-10
May-09
Nov-09
May-10
Nov-10
May-11
Nov-11
May-12
Nov-09
Nov-10
Aug-11
Feb-10
Feb-11
Feb-12
May-09
May-10
May-11
Nov-11
Kolkata
Bhubaneshwar
Mumbai
Ahmedabad
Lucknow
Bhopal
Source: Edelweiss research
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May-12
Feb-10
Feb-11
Feb-12
Cement
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098. Board: (91-22) 4009 4400, Email: research@edelcap.com
Vikas Khemani Nischal Maheshwari Head Institutional Equities Co-Head Institutional Equities & Head Research vikas.khemani@edelcap.com nischal.maheshwari@edelcap.com +91 22 2286 4206 +91 22 4063 5476
Coverage group(s) of stocks by primary analyst(s): Cement ACC, Ambuja Cement Ltd, Grasim Industries, India Cements, Shree Cements, UltraTech Cement
Recent Research
Date
Title VSF disappoints, cement shines; Result Update Costs disappoint; Result Update Efficiency delivered; Result Update
(INR)
Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09
Rating Interpretation
Hold Reduce Total Rating Expected to
104
60
18
183
appreciate more than 15% over a 12-month period appreciate up to 15% over a 12-month period depreciate more than 5% over a 12-month period
< 10bn
114
58
11
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