Cement Prices Dip To A Two-Year Low; Diesel Price Cut May Go In Vain: ICICI Securities

ICICI Securities Report

The current weakness in cement prices screams of elevated competitive intensity in the sector. After all, very rarely do prices plunge QoQ in Q4 (in fact they tend to rise QoQ) given it is peak construction season.

Such is the magnitude of competition that prices have already slipped ~5% QoQ to a near two-year low. It will be unfair to blame low demand growth (viz. estimated to rise 3-6% in Q4 FY24), as prices have slipped below the seasonally weak Q2 FY24 levels.

The sharp plunge has certainly set the stage for price recovery in April 2024 (sans which there can be huge earnings cuts). However, pricing volatility may remain the order of the day given huge capacity additions.

We prefer staying Neutral on the sector. The ~2% reduction in diesel rates offers cost savings of a mere Rs 10-15/tonne, and hence, may go in vain.

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