Chart Beat: Tough March quarter for cement companies?

The Indian cement industry has been experiencing stagnant pricing trends. (File Photo: Reuters)
The Indian cement industry has been experiencing stagnant pricing trends. (File Photo: Reuters)

Summary

  • There is a risk to realization of cement companies in the March quarter, if prices remain muted in the short term

Pricing trends in the domestic cement industry have remained subdued for a while now. According to a recent dealers channel check by Jefferies India, there was a 1.5% decrease in the all-India average cement price to 362 per 50-kg bag in January. The decline was more pronounced in the eastern region, with a 2.2% drop, followed by a 2% decline in the northern region month-on-month.

There is a risk to realization of cement companies in the March quarter (Q4FY24), if prices remain muted in the short term. Although there have been announcements of price increases in some markets for February, dealers remain uncertain about their implementation, as per the Jefferies report dated 1 February. On a brighter note, the softening of coal and petcoke prices may alleviate some pressure on profitability, partially offsetting the impact of weak pricing.

“We expect cement companies’ profitability to remain flat/decline sequentially in Q4FY24, as falling input prices and higher operating leverage are likely to be offset by lower cement prices," said a report by Emkay Global Financial Services dated 2 February.

 

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