Emkay: Cement Sector Update - North catches cold. Prices in Central, West & East inch up

Cement Sector

North catches cold. Prices in Central, West & East inch up

- All India prices at Rs269/bag remain flat m-o-m.Northern prices soften due to cold weather. Prices in East, West & Central inch up in anticipation of demand, south prices hold fort

- Marginal improvement in demand seen in certain pockets of Central, Western & Southern regions. While other regions expect demand to recover by month end.

- Cost pressures to persist in Q3FY12 led by 1. Higher e-auction coal prices 2. INR depreciation leading to higher imported coal prices 3. Hike in surcharges by railways.

- New (GCV based) coal pricing mechanism effectively a price hike of 28% for cement sector- intensifies cost headwinds. Estimate P&F cost to go up by Rs87/ton or 8.8%.

- Solid demand pick up remains trigger for further price hikes. Remain sector NEUTRAL. Negative on ACEM, UTCEM. Keep ACC our relative preferred pick. SRCM top mid cap pick.

Source : Equity Bulls

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