MONTHLY UPDATE

CEMENT
Segmental price differential widening
India Equity Research | Cement

Our channel checks indicate widening gap between trade and non-trade prices in North, East and West regions. We believe these are initial signs of price correction in the trade category as we approach the monsoon season. Prices have corrected by ~INR5-20/bag in the trade category and by ~ INR535/bag in the non-trade category across regions over the past one month. Cement demand was below expectation due to ban on sand mining in a few states and labour shortage owing to the harvesting season.

April cement despatches up ~7.3% YoY

Industry despatches in April rose ~7.3% YoY and dipped 13.7% MoM. While the top five players (ACC, Ambuja, UltraTech, JPA and Shree Cement) reported a growth of 6.2% YoY and a decline of 16.3% MoM, the rest of the industry seems to have grown by 8.6% YoY and declined by 10.8% MoM. Historically, there have been very few instances where rest of the industry growth has surpassed top five players surge and they were coupled with price weakness (refer chart 2).

Region-wise summary
We surveyed 29 cities across India to get a region-wise demand and price trend in both trade and non-trade categories. Key highlights are as follows:

North: Labour shortage singes demand

Cement prices in North have declined by ~INR10-20/bag in the trade segment and by ~INR10-35/bag in the non-trade segment over the month. Shortage of labour and sand has led to low demand in Rajasthan. Dealers expect prices to decline further by ~INR 57/bag across the region.

East: Low demand

Prices in the region have corrected by ~INR5-10/bag in the trade segment and by ~INR5-15/bag in the non-trade segment. Companies have resumed sales in non-trade segment in Raipur. Price decline of ~INR5-10/bag is expected in Bhubaneswar, Durg and Patna while it may remain flat in Kolkata and Raipur in the coming weeks.

South: Sand mining ban dents prices

Sudden drop in demand led by ban on sand mining in Andhra Pradesh (w.e.f. April 1, 2012) has resulted in a price drop of ~INR5-30/bag in the trade segment and INR515/bag in the non trade segment. Prices are under pressure in Bengaluru due to increased supply. Dealers expect prices to decline ~INR 5-15/bag in the coming weeks.

Navin Sahadeo
+91-22-6623 3473 navin.sahadeo@edelcap.com

Prasad Baji
+91 22 4040 7415 prasad.baji@edelcap.com

May 15, 2012

Edelweiss Research is also available on www.edelresearch.com, 1 Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Cement
West: Subdued demand
Prices have declined by ~INR5-16/bag in the trade category and by ~INR5-25/bag in the nontrade category across the region. Demand feedback is not encouraging. According to dealers labour shortage due to summer season has led to low demand. Further decline of ~INR10/bag is expected across region.

Central India: Prices begin to slip

Prices have declined by ~INR5-20/bag in both the trade and non-trade segments. Demand is low due to shortage of labour owing to the harvesting season. Dealers expect price decline of ~INR5-10/bag in the coming weeks.

Table 1: Cement despatches for April 2012

(Mn tonnes) Cement majors (A) ACC Ambuja Cements UltraTech Shree Cement Dalmia Cement OCL Jaiprakash Associates Others (A-B) All India (B) Apr-12 10.7 2.1 1.9 3.2 1.0 0.5 0.3 1.8 8.8 19.4 Mar-12 12.6 2.3 2.2 4.0 1.2 0.6 0.1 2.1 9.9 22.5 Apr-11 10.0 2.1 1.9 3.2 0.8 0.4 0.3 1.4 8.1 18.1 Change (Y-o-Y) 6.2 1.0 (0.2) (0.2) 28.4 14.8 0.7 22.9 8.6 7.3 Change (M-o-M ) (15.1) (11.5) (14.6) (20.4) (16.8) (22.9) 118.4 (15.1) (11.9) (13.7) YTD FY13 10.7 2.1 1.9 3.2 1.0 0.5 0.3 1.8 8.8 19.4 YTD FY12 10.0 2.1 1.9 3.2 0.8 0.4 0.3 1.4 8.1 18.1 Change (%) 6.2 1.0 (0.2) (0.2) 28.4 14.8 0.7 22.9 8.6 7.3

Source: Company, Edelweiss research

Chart 1: All-India monthly despatch trend 22.0

20.0
(mn tonnes)

20.5 15.0 9.5 4.0 (1.5)

16.0 14.0 12.0

Dec-09

Dec-10

Aug-09

Aug-10

Aug-11

Dec-11

Oct-09

Oct-10

Apr-10

Apr-11

Oct-11

Feb-10

Feb-11

All-India cement despatches

% growth YoY
Source: Company, Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Feb-12

Apr-12

Jun-09

Jun-10

Jun-11

(7.0)

(%)

18.0

Cement
Chart 2: Despatch growth of major vs non-major players and cement price trend 28.2 310
18.8 9.4 288 266 244 222 200

0.0 (9.4) (18.8)

Nov-09

Jan-10

May-10

Sep-10

Nov-10

Jan-11

May-11

Sep-11

Nov-11

Jan-12

Despatch growth for top 5 players Avg all india cement price (RHS)

Growth for rest of the industry

Source: Company, Edelweiss research

Table 2: Price trend in South Region- South

City Bangalore Comment Prices have corrected by ~INR10/bag in trade category and by ~INR5/bag in non-trade category. Price decline of ~INR5-10/bag is expected in coming weeks. Prices have increased by ~INR10/bag in trade category while they have declined by ~INR5/bag in non-trade category. Demand is yet to pick up significantly. Prices have corrected by ~INR5/bag in trade category while in non-trade category they have remained flat. Demand yet to pick up significantly. Prices in trade category have declined by ~INR30/bag and by ~INR15/bag in non-trade category. Dealers expect price declines of ~INR1015/bag due to low demand.

INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 290-320 300-310 300-320 300-315

Chennai

295-320

270-280 295-310

275-280

May-12

Mar-10

Mar-11

Mar-12

Jul-10

Jul-11

Cochin

325-340

295-335 325-345

295-335

Hyderabad

245-260

240-250 275-290

255-265

Source: Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

INR/bag

(%)

Cement
Table 3: Price trend in North Region- North
City Amritsar Comment Prices have declined by ~INR10-12/bag in the trade segment and by ~INR15-20/bag in the non-trade segment. Demand yet to see significant pick up. Current prices in the trade segment have declined by ~INR15-20/bag and by ~INR25/bag in the non-trade segment. Price decline of ~INR5/bag expected in coming weeks. Demand yet to see significant pick up. Prices have declined by ~INR17/bag in the trade segment and by ~INR10-15/bag in the non-trade segment. Subdued demand. Prices have declined ~INR15/bag in the trade segment and by ~INR20/bag in the non-trade segment. Price decline of INR5-7/bag expected in coming weeks. Demand yet to see significant pick up. Prices have declined by ~INR12-15/bag in the trade segment and by ~INR20/bag in the nontrade segment. Subdued demand. Prices in the trade segment have declined by ~INR13-14/bag and by ~INR15/bag in nontrade segment. Demand yet to see significant pick up. Prices have declined by ~INR18/bag in the trade segment and by ~INR15/bag in the nontrade segment. Demand is yet to see significant pick up. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 280-300 240-250 292-310 255-270

Delhi

245-260

235-240 265-275

260-265

Gurgaon

265-278

240-245 282-295

250-260

Jaipur

270-280

240-250 285-295

260-270

Jalandhar

290-300

250-275 305-312

270-275

Jodhpur

265-275

245-250 278-289

260-265

Ludhiana

290-300

250-265 308-318

265-280

Prices have declined by ~INR10-15/bag in the Sri Ganganagar trade segment and by ~INR35/bag in the nontrade segment. Demand is yet to see significant pick up.

265-270

230-240 275-285

265-275

Source: Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Cement
Table 4: Price trend in East Region- East
City Comment Bhubaneswar Prices have declined by ~INR10/bag in the trade segment and by ~INR15/bag in the nontrade segment. Further correction of ~INR10/bag expected. Prices in the trade category have declined by Durg ~INR5/bag. While prices in non-trade category have remained flat. Prices expected to decline by ~INR5-10/bag in the coming weeks. Demand yet to pick up significantly. Prices in the both trade and non-trade Kolkata category have remained flat. Demand yet to pick up significantly . Prices in trade category have declined by Patna ~INR10/bag and by ~INR10-15/bag in nontrade category. Prices expected to decline by ~INR5-10/bag in the coming weeks. Prices have remained flat in the trade segment. Raipur Companies have resumed sales in non-trade segment. Demand yet to pick up significantly. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 330-354 300-305 340-364 315-320

255-265

220-240 255-270

220-240

330-365

355-360 330-365

355-360

310-355

285-325 310-365

300-335

255-265 245-255

255-265

NA

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Cement
Table 5: Price trend in West Region- West
City Ahmedabad Comment Prices in trade segment have corrected by ~INR10/bag while in non-trade segment they corrected by ~INR5-15/bag. Demand yet to pick up significantly. Prices in the trade segment have declined by ~INR5/bag while in non-trade segment they have declined by ~INR5-22/bag. Demand subdued. Prices in the trade segment have declined by ~INR15-16/bag while those in the non-trade segment have declined by ~INR20-25/bag. Further decline of INR10/bag is expected. Prices have declined by ~INR10-15/bag in the trade segment and by ~INR25/bag in the nontrade segment. Demand yet to pick up significantly. Prices in the trade segment have declined by ~INR5-10/bag while in non-trade segment they have corrected by ~INR20/bag. Price decline of ~INR10/bag expected in coming weeks. Demand has improved marginally. Surat Prices in the trade segment have declined by ~INR5-13/bag while in non-trade segment they have declined by ~INR15/bag. Further decline of ~INR10/bag expected. Demand yet to pick up significantly. 285-292 260-265 290-305 275-280 INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expected Trade Non-trade Trade Non-trade trend trend 285-290 245-260 295-300 260-265

Mumbai

315-320

290-315 315-325

312-320

Nagpur

275-300 245-270

290-316

270-290

Nasik

295-325

260-280 310-335

285-305

Pune

300-320

280-290 310-325

300-310

Source: Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Cement
Table 6: Price trend in Central India Region- Central
City Allahabad Comment Prices have declined by ~INR5/bag in both trade and non-trade segments. Demand yet to see significant pick up. Prices have declined by ~INR5/bag in the trade segment and by ~INR5-15/bag in non-trade segment. Further decline of ~INR5-10/bag expected in coming weeks. While prices in the trade segment have largely remained flat, in the non-trade segment they have corrected by ~INR15/bag. Subdued demand. Prices have corrected by ~INR5/bag in the trade segment and by ~INR20/bag in the nontrade segment. Further decline of ~INR5-7/bag expected in coming weeks. Demand yet to see a signicant pick up. Prices in trade segment have declined by ~INR20/bag while those in the non-trade segment have declined by ~INR5-10/bag. Demand yet to improve significantly. Prices have declined by ~INR20/bag in the trade segment while those in non-trade segment have declined by ~INR5/bag. Further correction of ~INR10/bag expected. INR/50 kg bag As on May 11, 2012 As on Apr 10, 2012 Recent Expecte Trade Non-trade Trade Non-trade trend d trend 270-280 260-265 275-280 265-270

Bhopal

260-280

230-245 265-280

245-250

Ghaziabad

270-280

245-250 270-278

260-265

Indore

270-280

240-245 275-285

260-265

Kanpur

270-310

250-260 290-310

255-270

Lucknow

280-305

275-280 300-305

280-285

Source: Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

Cement
Chart 3: Price trend in North 295
276

Chart 4: Price trend in South 320

280
(INR/50 kg bag)

(INR/50 kg bag)

257 238 219 200

240 200 160 120

Feb-10 Feb-11 Aug-09 Aug-10 Nov-09 Nov-10 Aug-11 May-09 May-10 May-11 Nov-11 Feb-12 May-12

Aug-09

Aug-10

May-09

Nov-09

May-10

Nov-10

May-11

Aug-11

Nov-11

Delhi

Jaipur

May-12

Feb-10

Feb-11

Feb-12

Chennai

Hyderabad

Chart 5: Price trend in East 400

360

Chart 6: Price trend in West 330

298

(INR/50 kg bag)

(INR/50 kg bag)

320 280 240 200

266 234 202 170

Aug-09

Aug-10

Aug-11

Aug-09

Aug-10

May-09

Nov-09

May-10

Nov-10

May-11

Nov-11

May-12

Nov-09

Nov-10

Aug-11

Feb-10

Feb-11

Feb-12

May-09

May-10

May-11

Nov-11

Kolkata

Bhubaneshwar

Mumbai

Ahmedabad

Chart 7: Price trend in Central region 310

284
(INR/50 kg bag)

258 232 206 180

Aug-09 Aug-10 May-09 Nov-09 May-10 Nov-10 May-11 Aug-11 Nov-11 May-12 Feb-10 Feb-11 Feb-12

Lucknow

Bhopal
Source: Edelweiss research

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.

May-12

Feb-10

Feb-11

Feb-12

Cement
Edelweiss Securities Limited, Edelweiss House, off C.S.T. Road, Kalina, Mumbai 400 098. Board: (91-22) 4009 4400, Email: research@edelcap.com
Vikas Khemani Nischal Maheshwari Head Institutional Equities Co-Head Institutional Equities & Head Research vikas.khemani@edelcap.com nischal.maheshwari@edelcap.com +91 22 2286 4206 +91 22 4063 5476

Coverage group(s) of stocks by primary analyst(s): Cement ACC, Ambuja Cement Ltd, Grasim Industries, India Cements, Shree Cements, UltraTech Cement
Recent Research

Date

Company Grasim Industries India Cements UltraTech Buy Cement Buy

Title VSF disappoints, cement shines; Result Update Costs disappoint; Result Update Efficiency delivered; Result Update

Price (INR) 2,418 87 1,467

Recos Buy Buy Hold

1,150 950 750 550 350 150 Buy

05-May-12 25-Apr-12 23-Apr-12

(INR)

Distribution of Ratings / Market Cap Edelweiss Research Coverage Universe

Buy

Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09

Rating Interpretation
Hold Reduce Total Rating Expected to

Rating Distribution* * 1 stocks under review

> 50bn

104

60

18

183

Buy Hold Reduce

appreciate more than 15% over a 12-month period appreciate up to 15% over a 12-month period depreciate more than 5% over a 12-month period

Between 10bn and 50 bn

< 10bn

Market Cap (INR)

114

58

11

Access the entire repository of Edelweiss Research on www.edelresearch.com

This document has been prepared by Edelweiss Securities Limited (Edelweiss). Edelweiss, its holding company and associate companies are a full service, integrated investment banking, portfolio management and brokerage group. Our research analysts and sales persons provide important input into our investment banking activities. This document does not constitute an offer or solicitation for the purchase or sale of any financial instrument or as an official confirmation of any transaction. The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. Edelweiss or any of its affiliates/ group companies shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for an investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult his own advisors to determine the merits and risks of such investment. The investment discussed or views expressed may not be suitable for all investors. We and our affiliates, group companies, officers, directors, and employees may: (a) from time to time, have long or short positions in, and buy or sell the securities thereof, of company (ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as advisor or lender/borrower to such company (ies) or have other potential conflict of interest with respect to any recommendation and related information and opinions. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject Edelweiss and affiliates/ group companies to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. Edelweiss reserves the right to make modifications and alterations to this statement as may be required from time to time. However, Edelweiss is under no obligation to update or keep the information current. Nevertheless, Edelweiss is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither Edelweiss nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. Past performance is not necessarily a guide to future performance. The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. Edelweiss Securities Limited generally prohibits its analysts, persons reporting to analysts and their family members from maintaining a financial interest in the securities or derivatives of any companies that the analysts cover. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. Analyst holding in the stock: no. For recipients in the United States: This report was prepared by Edelweiss Securities, which is not a FINRA member nor a broker-dealer registered with the SEC. US persons receiving this research and wishing to effect any transactions in any security discussed in the report should contact an SEC-registered broker-dealer. In order to conduct business with Institutional Investors based in the U.S., Edelweiss Securities has entered into a chaperoning agreement with a U.S. registered broker-dealer, Marco Polo Securities Inc. ("Marco Polo"). Copyright 2009 Edelweiss Research (Edelweiss Securities Ltd). All rights reserved

Edelweiss Securities Limited

ISIEmergingMarketsPDF in-jaipuriaimdemo from 182.71.124.78 on 2012-05-17 11:43:24 EDT. DownloadPDF. Downloaded by in-jaipuriaimdemo from 182.71.124.78 at 2012-05-17 11:43:24 EDT. ISI Emerging Markets. Unauthorized Distribution Prohibited.