Cement Q4 Results Preview - Robust Demand But Pricing Muted: Axis Securities

Axis Securities Report

After witnessing good volume growth in Q3 FY23, momentum in cement demand continued in Q4 FY23 as well, primarily driven by the government infrastructure and housing push and well-supported by private real estate demand.

Demand momentum began on a good note in January 2023 followed by some softness in February 2023 and concluded on a higher note despite the higher base of the last year. While some softness in demand was witnessed in March 2023 on account of the Holi festival, the later part of the month witnessed a sharp spike in demand.

Institutional demand was more robust and was led by increasing construction activity in most regions. Both central and State governments infra-related projects witnessed good execution.

Many large states are due for election in FY24 which is a supporting factor for cement demand and we believe the same will continue moving ahead.

Retail cement demand witnessed some recovery. However, our channel checks suggest that rural demand has still not recovered meaningfully. On the other hand, urban and semi-urban demand was scattered based on the regions.

Region-wise South, East, and North India witnessed better demand traction followed by West and Central. Keeping these factors in view coupled with higher demand despite a large base last year, we expect volume for our coverage universe to grow by 8% YoY.

While Q3 FY23 witnessed good price hikes, the cement companies attempted further price hikes in Q4 FY23 to sustain the higher cost of production.

However, the price hike could not sustain despite good cement demand on account of higher competitive intensity and the entire price hike (Rs 15-Rs 20/bag) was rolled back.

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