Cement Sector Check - Price Weakness Persists; Demand Slows Down Seasonally: Motilal Oswal

Motilal Oswal Report

Our channel checks suggest that pricing pressure continues for the cement industry, resulting in a ~3% month-on-month reduction in the all-India average cement price (trade) in July-24. Prices declined across regions in the range of ~1-5% month-on-month, with the highest decline recorded in south (down 5%) followed by west and east (down ~4% each), north (down ~3%), and central India (down ~1%).

Further, cement demand has slowed down as rains extended across the country. We estimate cement volume to decline ~5% YoY in July-24, partly due to a higher base.

Dealers have indicated that cement price is under pressure due to demand slowdown and volume push by leading players. Most of the dealers do not expect price hikes in the near term due to oversupply and seasonality impacts. In Q1 FY25, realisation for our coverage cement companies (for results announced so far) declined 2.9% QoQ (down by Rs 160/tonne).

Given further corrections in cement prices in July-24 and no price hike in sight, we believe realization may further decline ~1-2% QoQ in Q2 FY25E, with a higher decline for south-based players (up to ~3% QoQ).

Average fuel price (both petcoke and coal) was flat month-on-month in July-24. However, the spot price increased month-on-month.

Prices of domestic/imported petcoke rose 2% month-on-month to Rs 12,663/tonne and $110/tonne, respectively. Imported coal (South Africa) price was up ~7% month-on-month at $114/tonne.

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