“Peaking in Q2FY23, international coal prices declined 10% sequentially in Q3FY23 and a further 25-30% till March 2023. From exit Q3 prices, the prevailing price is significantly lower, whereas petroleum coke prices are flat,” said analysts at Anand Rathi Shares and Stock Brokers Ltd in a report dated 9 March.
Savings on fuel costs are likely to come as a relief for cement companies, which have seen their margins come under pressure lately. As a result, the industry’s focus has now shifted to price hikes, which have been unimpressive so far.
Dealer channel checks by various brokers showed that price trends in January and February were muted across regions. Attempts at price hikes by cement companies failed due to keen competition. In March so far, prices have remained stable across India except for marginal increase in central and eastern regions, according to a recent channel check by Nirmal Bang Institutional Equities. However, with demand picking up, thanks to government spending on infrastructure projects, analysts at Nirmal Bang anticipate a price hike of ₹5-10 per bag during 10-16 March on the back of an 8-9% sequential improvement in demand in February.
For realisations outlook to improve, it is crucial that meaningful price hikes are undertaken and that they sustain at a higher level. But here’s a catch. According to analysts at Anand Rathi, a greater focus in the month of March on pushing volumes to meet year-end targets would keep cement price hikes in check. So, they expect prices to improve beginning April. In this scenario, cost optimisation and savings are keys to better performances, said the Anand Rathi report dated 9 March.
Even as investors in cement stocks wait for the much-needed price action, the sector’s realization per tonne is expected to improve aided by higher OPC product mix, said the Nirmal Bang report dated 10 March. The domestic brokerage house expects an increase of ₹175-250 in Q4FY23 in Ebitda/tonne for cement companies under its coverage.
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