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ICICI Securities Report
Our channel checks suggest industry demand likely declined in low-to-mid-single digit YoY in February 2022 as well, similar to the trend observed during October 2021-January 2022.
Dealers suggest likely rural weakness (given higher inflation), slower execution of infrastructure projects (due to rising project costs, delayed release of funds) and ongoing elections in few states such as Uttar Pradesh, Punjab etc. to be the key reasons for the current weak demand.
Average prices are up Rs 15-17/bag from the exit of December 2021 and additional Rs 30-35/bag would be required during March-June 2022 amid increasing supply and rising costs to sustain YoY Ebitda/tonne during H1 CY22.
While rising input costs pose downside risks to our / consensus earnings in the short term, risk-reward is turning favorable (post upto 30% stock price correction over past four months) as most cement stocks are trading below 10- year average asset-based valuation, in our view.
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