SECTOR UPDATE

Cement
Q2FY22 prices stable but cost elevated
Summary
Our interaction with cement dealers across India suggests that average cement Monthly key variables:
price at an all India level has been flat MoM in Sept-21. With this, Q2FY22 average
 Cement prices: Average cement price at an all India level is flat MoM in Sept-
cement price is flat QoQ. Stable price in the monsoon season is positive and lay
2021. Region wise, price increase is seen in North/South/West at
the ground of prices increase in dry season in 2HFY22. Region wise north has seen
0.6%/0.6%/0.7% MoM but price decline is seen in East at 4% and central prices
price increase in Q2FY22 by 2% QoQ and east has seen cut of similar magnitude
flat MoM. YTDFY22, average cement price is up 3% YoY at an All India level and
with other region prices largely stable MoM.
for the period region wise East prices is up 6%, North/West is up 3%, South is up
Cost continues to move up with imported coal price up 11% MoM in Sep-21 and 2% and Central is up 1% YoY.
Q2FY22 imported coal prices are up 40% QoQ. Freight cost index is flat MoM in
 Coal cost: In Sept-21, imported coal price (adj. for currency) is up 11% MoM.
Aug-21 but up 2% QoQ in Q2FY22 (Until Aug-21). Cement production in India for
Freight index is flat MoM in August 2021. Input cost inflation has been steadily
the month of July-21 has increased by 21.8% YoY at 29.7mt. Low base has led to
increasing in cement for fuel and logistics. YTDFY22 so far average coal prices
volume growth. In Q1FY22 industry EBITDA/t has increased QoQ led by ASP
have increased by 112% YoY and freight index is up 9% YoY in FY22 till date.
increase. But due to cost inflation and stable prices we expect QoQ cut in EBITDA/t
in Q2FY22E (exhibit 12).  Cement demand: Cement production in India for the month of July-21 has
increased by 21.8% YoY. YTDFY22 volume of industry is up by 38%. Our dealer
In the last 1 month, Large cap cement stocks are up 6% (in-line with Nifty 50) and
interaction suggests, volume for industry is increasing steadily.
Mid and Small cap cement stocks are down 2-4%. Valuation of stocks has less room
of disappointment as large cap stocks trades at 15x FY23E EV/EBITDA. At CMP, we
have HOLD rating for ACC and UTCEM and SELL rating for ACEM and SRCM.
Valuation snapshot
CMP TP Mkt Cap Revenue (Rs mn) Ebitda (Rs mn) EPS (Rs) BVPS (Rs) PER (x) P/B (x) EV/EBITDA (x) RoE(%) RoCE(%)
Companies
(Rs) (Rs) Reco (Rs mn) FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY22E FY23E FY23E FY23E
Ultratech Cement 7,743 7,362 HOLD 2,235,063 494,939 556,932 129,244 142,939 230.0 266.5 1707 1913 33.8 29.2 4.6 4.1 18.4 16.3 14.7 15.4
Shree Cement 30,451 25,618 SELL 1,098,697 157,697 175,866 44,750 47,811 786.7 844.0 4914 5490 39.0 36.3 6.2 5.6 24.8 22.8 16.2 17.4
Ambuja Cement* 420 347 SELL 833,971 143,233 158,839 34,484 37,348 11.9 13.0 110 118 36.1 33.2 3.9 3.7 23.7 21.6 11.4 13.9
ACC* 2,394 2,289 HOLD 449,629 169,726 185,156 29,848 33,262 101.4 115.3 752 842 24.0 21.1 3.2 2.9 13.1 11.5 14.5 18.6
Source: IDBI Capital Research; Note:*Dec Y/E for ACC, Ambuja

Vishal Periwal | [email protected] | +91-22-2217-1814 

Shouvik Chakraborty | [email protected]| +91-22-2217-1858 September 17, 2021
 250
270
290
310
330
350
370
300
310
320
330
350
360
370
380
390
400

340
Sep-18 300 Sep-18 316
300 313
Nov-18 301 Nov-18 315
299 310

0.6% MoM
Jan-19 294 Jan-19 311
305 315
Mar-19 313 Mar-19 319
343 351

down 4% MoM
May-19 351 May-19 360
355 368
Jul-19 341 Jul-19 361
336 355

Source: IDBI Capital Research

Source: IDBI Capital Research
Sep-19 323 Sep-19 351
Cement | Sector Update

315 353
Nov-19 311 Nov-19 356
308 353
Jan-20 320 Jan-20 363
322 365
Mar-20 318 Mar-20 363
324 366

Cement price INR/bag (LHS)

Cement price INR/bag (LHS)
May-20 327 May-20 381
336 386
Jul-20 324 Jul-20 377
318 370
Sep-20 306 Sep-20 369
303 367
Nov-20 302 Nov-20 386
298 381
Jan-21 293 Jan-21 369
300 366
Mar-21 316 Mar-21 378
335 380
May-21 346 May-21 381
350 381
A) PRICES / REALIZATION

Jul-21 349 Jul-21 393

340 386
Sep-21 326 Sep-21 389

Change MoM % (RHS)

Change MoM % (RHS)

0.0
2.0
4.0
6.0
8.0
0.0
2.0
4.0
6.0
8.0

10.0
12.0
10.0
12.0

(6.0)
(4.0)
(4.0)
(2.0)

(2.0)
300
320
340
360
380
420
440

400

300
310
330
340
350
360
370
380
390

320
Sep-18 322 Sep-18 338
318 335
Nov-18 317 Nov-18 333

flat MoM
317 330
0.6% MoM

Jan-19 315 Jan-19 328

318 384
Mar-19 318 Mar-19 379
346 395
May-19 363 May-19 400
361 384
Jul-19 353 Jul-19 363
349 340
Sep-19 359
Source: IDBI Capital Research

Source: IDBI Capital Research

Sep-19 348.8
346 348
Nov-19 348 Nov-19 349
344 350
Jan-20 354 Jan-20 362
362 365
Mar-20 360 Mar-20 364
360 363
May-20 406
Cement price INR/bag (LHS)

Cement price INR/bag (LHS)

May-20 381 404
377 Jul-20 396
Jul-20 365 405
370 Sep-20 389
Sep-20 361 379
356 Nov-20 376
Nov-20 354 373
355 Jan-21 383
Jan-21 351 376
354 Mar-21 388
Mar-21 368 391
368 May-21 405
May-21 375 413
375 Jul-21 420
Jul-21 370 395
373 Sep-21 398
Sep-21 371
Change MoM % (RHS)

Change MoM % (RHS)

0.0
5.0

0.0
2.0
4.0
6.0
8.0
10.0
15.0
20.0

(5.0)

10.0

(4.0)
(2.0)
(10.0)
250
270
290
310
330
370
390

350

300
310
330
340
350
360
370
380
390

320

Sep-18 317 Sep-18 309

316 298
Nov-18 314 Nov-18 303
flat MoM

314 312
0.7% MoM

Jan-19 313 Jan-19 313

328 318
Mar-19 328 Mar-19 313
355 338
May-19 366 May-19 354
365 356
Jul-19 352 Jul-19 343
343 335
Source: IDBI Capital Research

335
Source: IDBI Capital Research

Sep-19 343 Sep-19

338 326
Nov-19 337 Nov-19 323
336 325
Jan-20 346 Jan-20 334
353 350
Mar-20 351 Mar-20 351
352 350
Cement price Rs/bag (LHS)
Cement price INR/bag (LHS)

May-20 372 May-20 366

374 368
Jul-20 363 Jul-20 355
361 344
Sep-20 353 Sep-20 339
348 335
Nov-20 352 Nov-20 342
349 341
Jan-21 346 Jan-21 333
347 336
Mar-21 359 Mar-21 346
367 363
May-21 374 May-21 360
377 368
Jul-21 378 Jul-21 360
372 364
Sep-21 370 Sep-21 366
Change MoM % (RHS)
Change MoM % (RHS)
0.0
2.0
4.0
6.0
8.0

0.0
2.0
4.0
6.0
8.0
10.0

10.0
(6.0)
(4.0)
(2.0)

(6.0)
(4.0)
(2.0)
Exhibit 4: East Region Sept-21, avg cement price is Exhibit 5: Central Region Sept-21, avg. cement price is Exhibit 6: All India Sept-21, avg. cement price is largely
Exhibit 1: North Region Sept-21, avg. cement price is up Exhibit 2: South Region Sept-21, avg. cement price is up Exhibit 3: West Region Sept-21, avg. cement price is up

2
Cement | Sector Update

B) VOLUME
Exhibit 7: All India cement production is up 22% YoY in July-21
35.0 549% 600%
30.0 500%
25.0 400%
300%
20.0
200%
15.0 33%
10% 8% 16% 1% 3% -2% 8% -5% -2% -8% 4% 6% 5% 6%
-25% -22%-7%-14%-15%-4% 3% -7%-10%-6% -6% 8% 4% 22% 100%
10.0 -86% 0%

29.6
28.5
32.9
27.5
28.6
28.4
28.2
24.5
25.1
26.2
27.2
30.5
31.1
30.1
24.7

22.2
26.4
24.4
20.9
24.2
26.9
25.2
27.5
29.2
28.4
32.7
25.0
24.0
27.6
29.7
5.0 -100%

Apr-20 3.8
0.0 -200%

Jul-19

Jul-20

Jul-21
Jun-19

Jun-20

Jun-21
Jan-19

Apr-19
May-19

Nov-19

Jan-20

May-20

Nov-20

Jan-21

Apr-21
May-21
Aug-19

Aug-20
Feb-19
Mar-19

Sep-19

Dec-19

Feb-20
Mar-20

Sep-20

Dec-20

Feb-21
Mar-21
Oct-19

Oct-20
All India cement production m tonne (LHS) Increase YoY, % (RHS)
Source: PIB Release

Exhibit 8: All India cement demand and supply matrix, we expect pick in the utilization over FY21-23E
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22E FY23E FY24E FY25E
Cement Capacity m tonne 310 328 363 376 402 417 428 468 481 499 513 543 568 583 598
Yearly Capacity addition m tonne 34 18 35 13 26 15 11 40 13 18 14 30 25 15 15
Capacity addition growth yoy, % 12.3% 5.8% 10.7% 3.6% 6.9% 3.7% 2.6% 9.3% 2.8% 3.7% 2.9% 5.8% 4.6% 2.6% 2.6%

Cement Demand m tonne 214 230 243 249 257 269 276 297 334 332 320 352 394 418 443
Yearly demand m tonne 11 16 13 6 8 12 7 21 37 -2 -12 32 42 24 25
Demand growth yoy, % 5.4% 7.5% 5.7% 2.5% 3.2% 4.7% 2.6% 7.6% 12.5% -0.6% -3.6% 10.0% 12.0% 6.0% 6.0%

All India Cement Utilization 69% 70% 67% 66% 64% 65% 64% 63% 69% 67% 62% 65% 69% 72% 74%
Source: IDBI Capital Research. Industry

3
Cement | Sector Update

C) COSTS
Exhibit 9:Avg. imported coal price in Sept-21 is up 12% Exhibit 10: Adjusted for currency, imported coal price is
MoM (USD/t) up 11% MoM in Sept-21 (Rs/t)

12500
180
11500
160 10500
140 9500
120 8500

100 7500
6500
80
5500
60
4500
40 3500

Jun-18

Jun-19

Jun-20

Jun-21
Dec-18

Dec-19

Dec-20
Sep-18

Sep-19

Sep-20

Sep-21
Mar-18

Mar-19

Mar-20

Mar-21

Nov-18

Nov-19

Dec-20

Jun-21
Apr-18

Feb-19

Feb-20

Sep-20

Sep-21
Aug-18

May-19

Aug-19

May-20

Mar-21
Source: Bloomberg, Kcal 6000 Richard Bay Source: Bloomberg

Exhibit 11: Freight cost Index in Aug-21 is flat MoM and in Q2FY22 it is up 2% QoQ
38,000 4.0%
37,000 3.0%
36,000 2.0%
35,000 1.0%
34,000 0.0%
33,000 -1.0%
32,000 -2.0%
31,000 -3.0%
Apr-19

Jun-19

Apr-20

Jun-20

Apr-21

Jun-21
Aug-18

Aug-19

Aug-20

Aug-21
Dec-18

Feb-19

Dec-19

Feb-20

Dec-20

Feb-21
Oct-18

Oct-19

Oct-20
Freight Index Change MoM (%)

Source: Bloomberg

4
Cement | Sector Update

D) EBITDA/t
Exhibit 12: Industry EBITDA/t could be sharply down in Q2FY22 vs Q1FY22 (Rs/t)

1365

1356
1336
5000 1600

1252

1225
1211
4500 1400

1088

1001
4000

977
1200

943

890
3500

859

786
3000 1000

684
2500 800
2000 600
1500
400
1000
500 200
0 0

Q1FY19

Q2FY19

Q3FY19

Q4FY19

Q1FY20

Q2FY20

Q3FY20

Q4FY20

Q1FY21

Q2FY21

Q3FY21

Q4FY21

Q1FY22

Q2FY22
Raw Material Power Freight Employee Cost Other Expenses EBITDA (RHS)

Source: IDBI Capital Research

5
Cement | Sector Update

E) Market Share
Exhibit 13: Market Share by sales volume of top 14 players at 81% as on Q1FY22
Q1FY19 Q2FY19 Q3FY19 Q4FY19 Q1FY20 Q2FY20 Q3FY20 Q4FY20 Q1FY21 Q2FY21 Q3FY21 Q4FY21 Q1FY22
Shree Cement 8% 7% 7% 8% 7% 7% 7% 8% 9% 9% 9% 9% 9%
ACC 9% 8% 9% 8% 9% 8% 9% 8% 9% 9% 10% 9% 9%
Ambuja Cement 8% 7% 7% 7% 7% 7% 8% 7% 8% 8% 9% 8% 8%
Ultratech Cement 21% 23% 25% 27% 24% 23% 24% 24% 28% 28% 29% 29% 28%
Dalmia Bharat 5% 5% 5% 6% 5% 6% 6% 6% 7% 7% 7% 7% 6%
Ramco 3% 3% 3% 4% 3% 4% 3% 3% 4% 3% 3% 4% 3%
Sagar Cements 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Heidelberg Cement 2% 1% 2% 1% 1% 1% 1% 1% 2% 2% 2% 1% 2%
Jk lakshmi 3% 3% 3% 3% 3% 3% 3% 3% 4% 3% 3% 3% 3%
Birla Corp. 4% 4% 4% 4% 4% 4% 4% 4% 5% 5% 4% 5% 4%
Orient Cement 2% 2% 2% 2% 2% 2% 2% 2% 2% 1% 2% 2% 2%
Jk Cement 3% 3% 3% 3% 3% 3% 3% 3% 3% 4% 4% 4% 4%
Star Cement 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Mangalam Cement 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1% 1%
Combined market share of top 14 players 70% 70% 73% 77% 71% 70% 74% 71% 83% 83% 85% 85% 81%
Source: IDBI Capital Research

6
Cement | Sector Update

F) STOCK PERFORMANCE
Exhibit 14: Stock performance in cement sector
Performance (%) Relative to Index (%)
1M 6M 12M 3 Year 5 Year 1M 6M 12M 3 Year 5 Year
ULTRATECH CEMENT 1 16 95 92 100 -5 -3 42 34 -1
ACC Ltd 2 38 71 60 55 -4 18 19 3 -45
AMBUJA CEMENT 3 49 105 104 79 -3 30 53 46 -22
SHREE CEMENT 16 14 54 83 87 10 -6 1 25 -14
DALMIA BHARAT LT 21 46 190 NA NA 15 27 137 NA NA
RAMCO CEMENT 2 7 35 59 76 -4 -13 -18 1 -25
HEIDELBERGCEMENT 5 25 45 90 126 -2 6 -8 32 25
BIRLA CORP -4 66 85 95 114 -10 46 32 37 13
STAR CEMENT LTD -6 13 21 9 NA -12 -6 -31 -49 NA
JK CEMENTS LTD 7 24 114 329 346 1 5 62 272 246
JK LAKSHMI CEMEN -3 67 156 119 49 -10 48 104 61 -51
SAGAR CEMENTS -6 95 175 101 129 -12 75 122 43 29
PRISM JOHNSON LT -7 7 105 20 16 -13 -12 53 -38 -85
MANGALAM CEMENT 1 85 155 109 48 -6 65 102 51 -52
DECCAN CEMENTS 0 84 144 85 62 -6 64 91 27 -39
ORIENT CEMENT LT 0 63 158 63 -20 -6 43 105 5 -120
INDIA CEMENTS 8 14 45 69 27 2 -5 -8 11 -73
SANGHI INDUS LTD -3 64 138 -6 -12 -9 44 85 -64 -113
CEMENT SECTOR
- Large Cap, Mkt cap > Rs200bn 6 23 84 109 107 0 3 31 51 6
- Mid Cap, Mkt cap Rs50bn - Rs200bn -2 35 81 70 53 -8 16 29 12 -47
- Small Cap, Mkt Cap < Rs50b -4 51 93 40 76 -10 31 41 -18 -24
Nifty 50 6 19 53 58 100 0 0 0 0 0
Source: Bloomberg

7
Cement | Sector Update

Notes

Dealing (91-22) 6836 1111 [email protected]

Key to Ratings Stocks:

BUY: 15%+; HOLD: -5% to 15%; SELL: -5% and below.

IDBI Capital Markets & Securities Ltd.

Equity Research Desk
6th Floor, IDBI Tower, WTC Complex, Cuffe Parade, Colaba, Mumbai – 400 005. Phones: (91-22) 2217 1700; Fax: (91-22) 2215 1787; Email: [email protected]
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Compliance Officer: Christina D’souza; Email: [email protected]; Telephone: (91-22) 2217 1907

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8
Cement | Sector Update

Analyst Disclosures
We, Vishal Periwal and Shouvik Chakraborty, hereby certify that the views expressed in this report accurately reflect our personal views about the subject companies and / or securities. We also certify that no part of our compensation were, are or would be directly or indirectly related to
the specific recommendations or views expressed in this report. Principally, We will be responsible for the preparation of this research report and have taken reasonable care to achieve and maintain independence and objectivity in making any recommendations herein.

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associates may have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking
or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research Analyst or
his/her relative’s may have financial interest in the subject company. IDBI Capital or its associates may have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject
company at the end of the month immediately preceding the date of publication of Research Report. IDBI Capital or its associates may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of
publication of Research Report. The Subject Company may have been a client during twelve months preceding the date of distribution of the research report. Price history of the daily closing price of the securities covered in this note is available at www.bseindia.com;
www.nseindia.com and www.economictimes.indiatimes.com/markets/stocks/stock-quotes.