Cement prices see regional surge amid muted demand: Girija Shankar Ray

"See, ideally what happens is petcoke prices from past two-three months if you see the petcoke prices actually that has increased year on year basis. So, the companies they keep this energy inventory for 45 days to 50 days period of time," says Girija Shankar Ray, Yes Securities.

Could you broadly tell us that how essentially the demand for cement is shaping up because in last three years prices have been flat even though GDP growth rate has been above 6%, why is that?
Girija Shankar Ray: So, we did a brief channel check in January, February, and March, nine days of channel check, so in January you saw around Rs 2 of price hike, February also Rs 5, December also it was high that was because of central region price hike, but in March this nine days pricing was around, I can say Eastern region had seen a very big price hike that is Rs 15 to Rs 30 of price hike, but yes this price hike what we are seeing from past three-four months that is majorly contributed by your Eastern region and central region. Southern region prices are still remain, they are muted and there is no price hike from past four months in Southern region.

See, from demand perspective, demand is not that so great which could have much better but because of the government capex is slowed down and lastly the last month the Kumbh Mela also that has given some kind of volume disruption as well as the logistic issue was there, labour issue was there.

Even in fact upcoming Holi is there and Ugadi is there, so these are the factors which is going to dent the demand as well as the pricing. So, whatever the price hike the companies have taken recently in March, so I believe this is not going to sustain for longer period of time, again still 15 days more are there, so we will have to watch out whether this price is going to sustain or not because generally March is a year-end volume by lot of companies.

So, again the pressure will be there. So, more or less what I can say whatever the demand or pricing sustainability if you see that you can expect from second half of FY26, before that lot of kind of pressure will be there in terms of pricing pressure what I am seeing because lot of the large players are actually quickly trying to get the market share, so these pressures are still sustained in the market which are not taking price in any significant moment.

Petcoke is about 30-35% of the total raw material cost for cement. Given that oil prices have come down, will petcoke prices come down and if they come down , could this impact cement margins?
Girija Shankar Ray: See, ideally what happens is petcoke prices from past two-three months if you see the petcoke prices actually that has increased year on year basis. So, the companies they keep this energy inventory for 45 days to 50 days period of time.

So, whatever the price spike in petcoke price or international coal prices or domestic prices, in fact CPCL domestic petcoke prices has increased by Rs 630 per tonne last month, so these are the impact you will see in next quarter, not in this quarter because whatever the prices low-cost inventory that is going to reflect in this quarter. But yes, whatever the prices were up for the petcoke and international coal prices, the impact we will see in next quarter.

What is the view right now given the amount of consolidation in the industry and all the dynamics at play that we just spoke about, is it a bullish take now on cement and what are the preferred stocks here?
Girija Shankar Ray: For next March quarter, again what I am talking about March quarter we will see the high volume, it is like now from past nine months volume if you see there is a spike of around 3.5% year on year basis, nine month FY25.

Obviously as I am saying March quarter is a volume driven quarter. Some kind of volume uptick and more or less you will see 3.5% to 4% year on year volume growth for FY25. See, this could have much better because of certain reasons as I mentioned intensifying competition in between the large players to getting into quick market share and secondly, the slowdown in government capex programme.

So, these are the issues we were revolving around right now that is the reason we are not expecting much volume growth for FY25.

You will see kind of volume spike or kind of spurt in volume in FY26 that too you can expect quarter two FY26 onwards you will expect some kind of demand, but before that I do not expect much from the cement companies but yes, again one more concern that is increase in petcoke and coal prices.

See, company have to do two things either they have to increase the price or they have to use low cost energy inventory to sustain the margin going forward.

So, here the concern is that pricing pressure is there, so increasing the pricing in a significant way I believe it is not much possible right now, but yes, companies who use lot of green energies and who are into WHRS or solar or captive coal mining, so they will be having some kind of benefit and their margin will expand.

Basically, what I am talking about the regional players are going to benefit right now. As I mentioned eastern region prices are actually up by Rs 10 to Rs 15, continuously it has improved from past two months, so this time in this quarter we can expect eastern region players will be giving good numbers.

And one more point I need to add it here, last quarter most of the companies they applied a different strategy to give good numbers. Some companies they played volume over prices, some companies prices over volume.

So, when I am saying about prices over volume, they do not want to lose the pricing despite having a low volume sales. So, this time also same kind of scenario we will see in the market for this quarter.