cement dec10

7/29/2019 Cement Dec10

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Cement prices across regions have softened due to weak demand and inventory

built up. With demand yet to pick up significantly, pricing scenario is expected

to remain subdued in the coming weeks. North may however, see some

improvement in prices due to reduced supply.

November 2010 despatch growth disappointing for major players

Aggregate despatches of seven players (comprising ~52% of the overall industry

despatches) declined 2.3% Y-o-Y. Overall industry despatch growth for November

2010 is estimated be flat or marginally down Y-o-Y. Non-availability of labour, due

to the festive season and unexpected rains in parts of India, are key reasons

behind the subdued demand.

As per our latest channel check, demand has not picked up across regions,

so far in December 2010.

Region-wise summary

We have surveyed 29 cities across India to get a region-wise trend of demand and

prices in the trade and non-trade categories. Key highlights are as below:

North: Prices may see some improvement

Demand growth in the region is subdued and inventories are rising. Current prices

have declined by INR 10-20/bag across regions over the last month. North, may

however, see some improvement in prices due to reduced supply.

East: Prices decline due to weak demand

Cement prices have declined by INR 5-20/bag across the region over the last

month. Poor demand from government projects and inventory overhang may keep

prices under pressure in the coming weeks.

South: Prices soften in Karnataka

Even as dealers convey muted demand growth, prices have declined by ~INR 10-

20/bag across the region, except Andhra Pradesh. Highest correction was seen in

Bangalore of ~INR 10-20/bag over the last month. Prices are expected to remain

flat in the near term. Monsoons in Tamil Nadu and Kerala will keep demand muted

in the coming weeks.

West: Prices better in Gujarat; weak in Maharashtra

While channel checks continue to convey muted demand growth, prices have seen

improvement in Gujarat, while they have softened in Maharashtra. Sand

unavailability continues to dampen demand growth.

Central India: Prices drop across region; improvement expected in U.P.

With poor demand and increased supply, prices have dropped in the range of INR

10-20/bag across the region. Over the last month channel checks convey flat-to-

marginal price decline in Madhya Pradesh in the coming weeks. Sharp price drop in

Uttar Pradesh may lead to some rebound in prices.

Edelweiss Research is also available on www.edelresearch.com, Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited

Navin Sahadeo

+91-22-6623 3473

[email protected]

Prasad Baji

+91 22 4040 7415

[email protected]

India Equity Research | Cement Monthly Update

CEMENT CHANNEL CHECK

xxxPrices soften due to continued weakness in demand


2/8

2 Edelweiss Securities Limited

Cement

Table 1: Cement despatch figures

Source: Company, Edelweiss research

Chart 1: All India monthly despatch trend

Source: Company, Edelweiss research

*Nov-10 despatch is estimated

(Mn tonnes) Nov-10 Oct-10 Nov-09Change

(Y-o-Y)

Change

(M-o-M )

YTD

Nov-10

YTD

Nov-09

Change

(%)

Cement majors 8.1 10.2 8.3 (2.3) (19.9) 72.3 66.3 9.0

ACC 1.74 1.92 1.66 4.8 (9.4) 13.7 13.8 (1.1)

Ambuja Cements 1.42 1.75 1.55 (8.6) (19.2) 12.9 12.1 6.9

AV Birla Group 2.66 3.42 2.93 (9.2) (22.2) 24.7 23.6 4.6

Shree Cement 0.65 0.87 0.71 (7.7) (24.7) 6.0 5.9 1.1

Dalmia Cement 0.29 0.44 0.28 0.5 (34.6) 2.9 2.7 10.6

OCL 0.27 0.30 0.22 27.1 (9.6) 2.1 1.9 11.7

Jaypee Group 1.10 1.46 0.98 12.5 (24.4) 9.9 6.3 57.7

(5.0)

0.0

5.0

10.0

15.0

20.0

12.5

13.7

14.9

16.1

17.3

18.5

Nov-08

Dec-08

Jan-09

Feb-09

Mar-09

Apr-09

May-09

Jun-09

Jul-09

Aug-09

Sep-09

Oct-09

Nov-09

Dec-09

Jan-10

Feb-10

Mar-10

Apr-10

May-10

Jun-10

Jul-10

Aug-10

Sep-10

Oct-10

Nov-10

( % )

(mntonnes)

All-India cement despatches % growth YoY


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Edelweiss Securities Limited 3

Cement

Table 2: Price trend in North

Source: Edelweiss research

Region- North

City Trade Non-trade Trade Non-trade Comment

Delhi 207-220 180-190 225-230 200 Price correction has been sharper in the

non-trade segment by INR 10-20/bag.

Demand remains low. Lower utilisation by companies may help

prices improve in the near term.

Gurgaon 225-230 175-185 230-240 195-200 Prices in the trade segment were down by

~INR 5-10/bag and in non-trade segment

by ~INR 15-20/bag.

Demand continues to be low.

Ludhiana 235-245 185-200 245-255 200-205 Prices have decreased across segments.

Demand weak.

Amritsar 250-253 210-220 255-260 210-220 Prices in the trade segment have corrected

by INR 3-5/bag and are holding up in the

non-trade segment.

Jalandhar 240-255 170-180 255-260 210-220 Prices have corrected due to weak

demand.

Even premium brand players are

aggressively pricing their products in non-

trade segment.

Jaipur 205-215 180-185 205-215 190-195 Demand remains muted. Prices in the non-

trade category have corrected by

INR 10/bag.

Companies are making unsuccesful

attempts to hike prices to sustain prices

and push sales to dealers.

Jodhpur 190-205 175-185 200-205 190-195 Demand continues to remain weak.

Companies are trying to hike prices.

Sri-Ganganagar 206-214 170-180 214-218 190-195 Prices have corrected by INR 10-15/bag in

the trade and non-trade segments. Companies have announced hike of INR

20-25/bag on Dec 04, 2010, but are yet to

implement it.

Price hikes are, however, unlikely to be

passed through to consumers at one go.

INR/50 kg bag

Recent

trend

Expected

trend

As on 8 Dec 10 As on 8 Nov 10


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Cement

Table 3: Price trend in East


Table 4: Price trend in South


Region- East INR/50 kg bag


Bhubaneshwa 220-240 190-200 235-258 220-225 Lack of demand has led to price

correction by INR 5-15/bag in the trade

segment. In non-trade segment, prices were

down by INR 25-30/bag.

Huge inventory build up may lead to

further correction in the trade category.

Kolkata 210-250 200-230 220-260 220-240 Current demand is low on non-

availabilty of labour.

Prices have corrected by INR 10-

20/bag.

Patna 220-270 220-240 240-295 230-240 Prices in the trade and non-trade

segments have corrected by INR 10-

20/bag. Demand continues to be low.

Durg 175-195 160-185 195-210 160-195 Prices have been under continuous

pressure because of lack of demand.

Thus, prices in the trade and non-trade


20/bag.

Raipur 170-175 160-165 175-185 165-175 Demand is subdued and prices are

under pressure.

Prices in the trade and non-trade


10/bag.

As on 8 Dec 10 As on 8 Nov 10Recent

trend

Expected

trend

Region- South

City Trade Non-trade Trade Non-trade CommentHyderabad 215-230 208-225 215-230 208-225 Demand is low, but prices are holding

up.

Chennai 255-260 240-245 265-270 250-255 Prices have softened by INR 10/bag

over the past month due to

government pressure.

Bangalore 250-270 240-250 270-280 250-270 Prices have softened by INR 10-

20/bag over the past month due to

weak demand.

Cochin 285-295 275-280 295-300 285-290 Demand remains subdued due to

certain factors like restriction on

sand-mining, monsoons etc.

Prices are expected to remain flat.

Recent

trend

Expected

trend

INR/50 kg bag



5/8


Cement

Table 5: Price trend in West


Region- West


Pune 215-220 206-215 230-248 220-235 Demand is weak and prices are under

pressure.

Companies have made unsuccesfulattempts to raise prices.

Mumbai 245-255 230-245 245-255 235-245 Demand is weak due to non-availability

of sand.

Increase of INR 5/bag has been rolled

back due to low demand.

Nagpur 220-253 190-217 235-255 195-220 Demand was weak due to non-

availabilty of labour and sand.

Nasik 225-250 210-225 230-255 210-225 Prices in the trade segment have

decreased by INR 5-10/bag, but

demand continues to be muted on

account of low sand availabilty.

Ahmedabad 210-215 200-205 205-210 195-200 Demand has been weak.

Price however have increased by INR

5-10/bag

Surat 210-220 200-210 205-210 200-205 Prices have increased in the trade

segment by INR 5-10/bag, but non

trade has remained flat.


INR/50 kg bag

Expected

trend

Recent

trend


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Cement

Table 6: Price trend in Central


Region- Central


Lucknow 198-220 180-190 225-240 210 Prices have declined by INR 20-25/bag and

demand is slow.

Stock levels with dealers are low and pricesare expected to see uptick with pick up in

demand.

Kanpur 200-210 180 220-225 190 Because of weak demand, prices have

declined by INR 10-15/bag in the trade and

non-trade segments

Allahabad 190-195 175-185 210-215 200-205 Prices have corrected by ~INR 10-20/bag in

the trade and INR 20-25/bag in the non-

trade segments.

Lack of demand has led to decline in prices.

Ghaziabad 200-212 180-190 230-250 190-200 Prices in the trade and non-trade segments

have decreased by INR 30-40/bag and INR

10/bag, respectively.

Small size orders continue to be accepted in

the non-trade, to push higher volumes.

But, dealers are of the view that prices are

very low and are likely to only increase here

on.

Bhopal 175-205 150-165 205 150-180 Prices continue to remain soft due to low

demand

Increasing gap between trade

and non-trade is putting pressure on trade

prices.

Indore 180-210 150-170 205-220 175-200 Prices have declined by INR 10-20/bag in

the trade and non-trade segments.

Demand has been lower than expectation.

INR/50 kg bag

Expected

trend

Recent

trend



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Cement

Chart 2: Price trend in Northern region Chart 3: Price trend in Southern region

Chart 4: Price trend in Eastern region Chart 5: Price trend in Western region

Chart 6: Price trend in Central region


200

212

224

236

248

260

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

(INR/50kg

bag)

Delhi Jaipur

200

220

240

260

280

300

Sep-07

Nov-07

Jan-

08

Mar-

08

May-08

Jul-

08

Sep-08

Nov-08

Jan-

09

Mar-

09

May-09

Jul-

09

Sep-09

Nov-09

Jan-

10

Mar-

10

May-10

Jul-

10

Sep-10

Nov-10

(INR/50kgbag)

Kolkata Bhubaneshwar

180

204

228

252

276

300

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

(INR

/50kgbag)

Lucknow Bhopal

120

160

200

240

280

320

Sep-07

Nov-07

Jan-08

Mar-08

May-08

Jul-08

Sep-08

Nov-08

Jan-09

Mar-09

May-09

Jul-09

Sep-09

Nov-09

Jan-10

Mar-10

May-10

Jul-10

Sep-10

Nov-10

(INR/50kg

bag)

Chennai Hyderabad

170

194

218

242

266

290

Sep-07

Nov-07

Jan-

08

Mar-

08

May-

08

Jul-

08

Sep-08

Nov-08

Jan-

09

Mar-

09

May-

09

Jul-

09

Sep-09

Nov-09

Jan-

10

Mar-

10

May-

10

Jul-

10

Sep-10

Nov-10

(INR/50kgbag)

Mumbai Ahmedabad


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Cement

Edelweiss Research is also available on www.edelresearch.com ,Bloomberg EDEL , Thomson First Call, Reuters and Factset. Edelweiss Securities Limited

Edelweiss Securities Limited, 14th Floor, Express Towers, Nariman Point, Mumbai 400 021,Board: 91-22 2286 4400 Email: research@edelca .com

Vikas Khemani Head Institutional Equities [email protected] +91 22 2286 4206

Nischal Maheshwari Head Research [email protected] +91 22 6623 3411

Coverage group(s) of stocks by primary analyst(s) : Cement

ACC, Ambuja Cement, Grasim Industries, India Cements, Jaiprakash Associates and UltraTech Cement

EW indices Recent ResearchDate Company Title Price (INR) Recos

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Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe

Rating Distribution* 116 45 12 176

* 3 stocks under review

Market Cap (INR) 110 53 13

> 50bn Between 10bn and 50 bn < 10bn

Buy Hold Reduce Total

Rating Interpretation

Buy appreciate more than 15% over a 12-month period

Hold appreciate up to 15% over a 12-month period

Reduce depreciate more than 5% over a 12-month period

Rating Expected to

12-Nov-10 IndiaCements

Below par performance 116 Reduce

28-Oct-10 GrasimIndustries

Aided by other income ;Result Update

2,279 Hold

26-Oct-10 UltraTechCement

Upside capped;Result Update

1,100 Reduce

21-Oct-10 AmbujaCements

Rich valuations;Result Update

142 Reduce800

940

1,080

1,220

1,360

7-Dec-09 7-Jun-10 7-Dec-10

EW Construction Material Index Nifty

cement dec10

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