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【出版时间及名称】：2010年2月印度水泥行业研究报告
【作者】：Hichens Harrison证券
【文件格式】：pdf
【页数】：37
【目录或简介】：
Cement
Demand strong but price headwinds imminent
Cement dispatches have been robust in H2FY10 on account of higher government
expenditure on infrastructure and steady rural consumption. We expect demand
to hold firm, particularly in India’s northern market, with a growth of over 10%
in the next two years. On the flip side, our analysis suggests that cement
overcapacity is imminent in the medium term. This together with rising coal and
freight costs signals a challenging road ahead in FY11. With the southern market
at greatest risk of a supply glut, we maintain our preference for north-based
players like Grasim Industries, Jaiprakash Associates and Shree Cement.
Mid caps register strong volume growth in Jan: Mid cap companies in the RHH
cement universe led the way in terms of dispatch growth for January ’10. While
India Cements’ volumes grew 30% YoY, JK Lakshmi Cement registered an
increase of 27%. Orient Paper, Shree Cement and Birla Corp also logged strong
growth rates of 20%, 18%, and 16% YoY respectively. Mangalam Cement was
the only player in our universe to witness a decline, with volumes slipping 16%
YoY due to a five-day maintenance shutdown at its plant.
Amongst large caps, the Aditya Birla group (Grasim and UltraTech) continued to
outpace Holcim (ACC and Ambuja Cement). YTD, Shree Cement and Grasim
were in the lead with volumes rising 24% and 20% respectively.
Demand to grow at 10%+ for next two years: With cement dispatches picking up
over the last three months, we expect to close FY10 with demand growth of over
11%. Further, with the sustained government thrust on infrastructure spending and
a revival in the real estate sector, demand for cement could exceed the traditional
correlation range of 1.2–1.3x GDP to touch 1.4–1.45x in FY11 and FY12.
Price recovery in Q4 may be short-lived: After declining by Rs 15–80/bag in
Q3FY10, cement prices have partially recovered (in the range of Rs 10–40/bag)
on account of buoyant demand and logistics-related supply shortages. The price
hikes have been spread across regions, barring the south. However, with a large
quantum of fresh capacities set to be commissioned in FY11 (30mn tonnes), we
expect pricing power to deteriorate post May’10.
Likely rollback of excise cut: Budget 2010 is likely to see a rollback of the excise
duty cut from 8% to 10%. Railway freight could also increase. We believe cement
players will pass on the duty hike by raising prices in the near term. Over the
longer term, however, cost rationalisation will be the key to preserving profitability.
FY11 a testing time – S. India most vulnerable: We believe FY11 will be a difficult
year for the industry as the risk of oversupply looms large. The southern market
would be the hardest hit as a bulk of the planned capacities will be commissioned
here (53% and 23% of all-India fresh capacity in FY10 and FY11 respectively).
This coupled with a demand slowdown due to political turmoil in Andhra Pradesh
(AP) makes it the most vulnerable to pricing headwinds. While the northern,
central and eastern markets will also face pressures brought on by capacity
expansion, buoyant demand in these regions is likely to mitigate the supply glut.
All roads head north: For the next six months at least, cement will continue to be a
regional play. While demand remains strong in the north, the central and eastern
areas are seeing the highest price hikes. We remain bullish on select companies
based in these regions, namely Grasim, Jaiprakash Associates and Shree Cement in
the large cap space and Birla Corp, JK Lakshmi and Mangalam Cement in mid caps.
On the other hand, as the south moves into an oversupply phase and the troubled
state of AP continues to weigh down demand, we remain bearish on India Cements.
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