RK Global Shares & Securities Said That After Increasing Charge in Q3FY12 From 7% to 10%

RK Global Shares & Securities said that After increasing charge in Q3FY12 from 7% to 10% and the development surcharge from 2% to 5%, the railways have again gone for another round of freight rate increase by 19-33%, with effect from March 6. This has resulted in weighted rail freight increase of 20%. As the industry transports 45% of its total production through railways, the freight cost for the industry is expected to increase by 10%. Also the industry sources 55% of its coal requirement from domestic linkage coal for which preferred mode of transportation is railways, thereby resulting in further increase of 2-3% in power & fuel cost. It added that Cement manufacturers have already hiked prices by at least INR 10 a bag to offset the cost increase. We expect cement demand to remain upbeat as the industry is heading towards the pre-monsoon, which is traditionally a period of increased demand. Moreover the Union Budget s focus on developing infrastructure and on affordable and rural housing should provide a boost to cement demand over the next few quarters. We maintain our demand growth estimate of 8% in FY13. Cement giants ACC, Ambuja and UltraTech together, reported 6.6% YoY increase in their dispatches for the month of Mar-2012 to 8.53 million tonnes. Cited increase in construction works across Eastern & Northern India & marginal uptick in consumption across the Western & Central India as key reasons for such higher dispatches. Cement dispatches continued to grow in double digit for the fourth consecutive month on account of increase in off take from construction activities post monsoon. Demand is improving in rural housing, semi-urban housing and infrastructure segments in the western, northern and most importantly southern regions. After a sharp increase in cement prices is witnessed during last month, it is expected that demand to remain upbeat as the industry is heading towards the pre-monsoon period, which is traditionally a period of increased demand. Moreover the Union Budget`s focus on developing infrastructure and on affordable and rural housing should provide a boost to cement demand over the next few quarters. It said that We expect demand to grow at 8% in FY13. Price Scenario: All India cement prices have increased by INR 10 to INR 30 a bag in the last month and are currently hovering in the range of INR 300 to INR 310 a bag. This increase was mainly done to pass on increased cost owing to hike in rail freight and excise. Prices in the northern region improved by INR 15 to stood at INR 280 a bag. Cement prices in Eastern region rose by INR 10 with prices hovering near its peak levels of INR 310 per bag. Central region too witnessed an increase of INR 20 on account of the 20% freight hike recently announced by the Indian Railways. Prices in UP witnessed an uptick of INR 25 a bag and with elections coming to an end. We expect a pick up in construction activity in the region. Western region once again witnessed maximum price increase of INR 25 a bag driven by better demand in Gujarat due to mass housing schemes in light of state elections in 2012. Currently cement prices are hovering in the range of INR 265 to INR 280 a bag. We expect the demand momentum to continue on the back of government-led projects and housing demand growth. Source: uaecement