Construction Materials share price target

Prefer Ambuja (ACEM) over ACC due to upcoming expansion in North Board of Directors of ACC and ACEM approved renewal of TKH fees for next couple of years effective 1st January, 2021 at existing rate of 1% of net sales. Both the stocks have been under pressure for last one month due to overhang on the status of fees. Status quo on fees would help to retain investor sentiments as any increase in fees would have further escalated the below average performance on margins and volume growth. We maintain BUY on ACC and ACEM with revised TP of Rs1,770 and Rs280 respectively based on...

All India cement production in Oct-20 has increased by 3% YoY. Volume growth is led by pick-up in the construction activity and also supported by lower base of last year (Oct-19, volume -8% YoY). On cement prices, our interaction with cement dealers suggests at an all India level, cement price has decreased by ~1% MoM in Dec-20. Average cement price is down 3% in Q3FY21 vs. an average of Q2FY21. Region wise, baring north, the cement prices is down for other region in Q3FY21 vs. an average of Q2FY21. In Dec-20, imported coal price (adjusted for exchange rate) is up 7% MoM. But still, average coal price is down 19% in YTDFY21 vs. FY20. But...

Our cautiously optimistic stance on the cement sector (as highlighted in Cement Sector Update - Cautiously optimistic on FY22 recovery) has played out well.

All India cement production in September-20 has decreased by only 4% YoY. There has been a pick-up in the construction activity and we understand large players have witnessed a gain in the market share. As on Sept-20, Ultratech market share (by sales volume) has increased by 4%, ACC by 1%, Ambuja Cement by 1% vs. March-20 (Exhibit 11). On cement prices, our interaction with cement dealers suggests at an all India level, cement prices has increased by ~3% MoM in Nov-20. With Nov-20 month increase, average cement price is now down 2% in Q3FY21 (Oct, Nov) vs. an average of Q2FY21. Region wise, baring north, the cement prices...

sharply after the relaxation of lockdowns in May-June on the back of strong rural housing demand. While there was a seasonal dip in demand during July-Aug, the channel checks indicate a strong pick-up in demand in September. Demand recovery has been strong in the East, Central and North, and remains weak in the South...

Average cement prices at an all India level is down by 1.4% MoM in Oct-20. But our dealer interaction suggests that the price could increase by month end, as dry season is approaching. As on Oct-20, avg cement price is down by 1% at all India level vs. March-20. Baring south and north region, Oct-20 cement prices is down vs exit prices of March-20 in other three regions. Cement prices in East and West is down 5% vs March-20. Cement industry production decreased by 15% YoY in August 2020 (latest data available). Cement demand decline is due to monsoon and the local lockdowns. But region wise, cement demand is recovering in East /...

Our channel check suggests, average cement prices at an all India level is down by 2% MoM in Sept-20. After factoring Sept-20 weakness, avg. cement price is up 1% at all India level vs. March-20 and is up 3% vs. Sept-19 cement prices. We understand weakness in the cement price is seasonal due to softness of cement demand in monsoon. India has received 7% higher rainfall in this monsoon season versus past averages. Cement production in India for the month of July-20 (Latest available data) has decreased by 14% YoY to 24mt, which is more than June-20 decline of 7% YoY. This is due to increase in the intensity of rainfall in July/Aug-20...

Our initial evaluation of the impact of novel coronavirus, or COVID-19, on the cement sector, as highlighted in our previous report (Cement Sector Update)

After steep hike in April and May, prices in AP/Telangana fell by Rs15/bag MoM South due to usual increase in competition. (Rs/bag) Prices in Trivandraum fell by Rs5/bag MoM w hile prices in Chennai inched up...

Our channel check suggests, average cement prices at an all India level is marginally down by 0.6% MoM in Aug-20. As on Aug-20, avg cement price is up 3% at all India level vs. March-20. And baring west region, Aug-20 cement prices is up vs exit prices of March-20 in all the other four regions. Cement industry production decreased by 7% YoY in June 2020 (latest data available). Cement demand has seen sharp improvement in June-20 vs May-20 and is driven by trade sales. But given the monsoon, we expect the demand to remain soft now. We are modeling in cement demand at -14% YoY in FY21E with H1FY21 demand at -26% YoY and...