Cement companies eye further price hikes
Cement companies are likely to exit fiscal year 2021 with better-than-expected volume growth. Aided by pent-up demand and a favourable base, analysts see cement manufacturers posting double-digit volume growth in the March quarter.
In fact, according to the estimates of ICICI Securities Ltd, the industry is likely to post the highest ever quarterly volumes of around 105 million tonnes with 20 to 22 per cent year-on-year (y-o-y) growth. However, investors should note that volume growth, particularly in the March quarter, is also helped by cement firms’ push to meet year-end sales targets by reducing prices.
Nonetheless, the sector’s demand outlook seems to be bright for fiscal 2022. Research house Macquarie Capital foresees 13 per cent demand growth in FY22, thanks to the government’s infrastructure focus, healthy rural demand and a potential recovery in urban housing demand. “Against this backdrop, we expect our covered companies to deliver superior 14 to 24 per cent growth,” it said in a report on 30 March.
With the prospects of rising demand and ongoing input cost inflation, cement companies are likely to announce another price hike of at least Rs 10 per bag. One cement bag weighs 50 kg.
The latest dealers channel check by Elara Securities (India) shows that after a price hike of Rs 10 to Rs 16/bag in the March quarter, cement companies may take another increase in April. “Cement firms attempted price hikes of Rs 5 to Rs 35 per bag across pockets in early March, and prices over the month have been stable in most markets despite year-end pressure. As per market intermediaries of South India, Maharashtra, Delhi, Rajasthan, Bihar, Madhya Pradesh, Uttar Pradesh and West Bengal, cement firms may attempt a price hike in the range of Rs 10-30 per bag in April," said the domestic brokerage house in a report on 29 March.