Cement costs have been hiked marginally within the month of March in sure pockets however stay secure at an all-India degree. Sellers channel verify by Kotak Institutional Equities reveals that costs had been raised by ₹1, ₹4 and Rs8 per bag within the North, West and Central India. One cement bag weighs 50 kilograms. Then again, costs within the South and East have seen a dip. On a median, one cement bag now prices ₹377 in comparison with ₹376, stated the Kotak report dated 17 March.
“Traditionally, cement costs improve 3% quarter-on-quarter (q-o-q) in 4Q; whereas 4QFY22 costs, up to now, are up 1% q-o-q, primarily led by East and are struggling to rise regardless of sturdy seasonality,” added the report.
Within the backdrop of the steep price inflation that the sector is battling with, muted pattern in costs is a foul information. The price of key inputs petroleum coke and imported coal continues to be an elevated degree. Additionally, with petrol and diesel costs anticipated to be revised larger, the sector’s freight price might shoot up as properly. So, buyers ought to brace for a poor working efficiency by cement makers within the March quarter.
“Our evaluation of the previous two enter price inflation cycles (FY11-12 and FY18-19) reveals that price will increase had been handed on inside 3-4 quarters. Nonetheless, given a a lot larger improve in enter costs this time round, the pass-through might take longer, in our view,” analysts at Emkay World Monetary Companies Ltd stated in a report on 16 February.
Since energy and gasoline price account for round 25-30% of the cement business’s whole working price, the dent on working margins may very well be steep, now that worth hikes haven’t performed out as anticipated and that too in a seasonally sturdy quarter. This has saved shares of key cement makers underneath stress up to now few weeks. Fears of an extra downward revision in earnings has dampened buyers sentiment in the direction of this sector.
In accordance with analysts at Kotak Institutional Equities, weak demand in 4QFY22 is the important thing cause behind stagnant costs and with commodity prices having risen amidst geo-political tensions would preserve margins underneath stress in 1HFY23. “We see vital draw back danger to consensus estimates,” cautioned the home brokerage home.
Supply: Live Mint