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Motilal Oswal Report
Our channel checks reflect expected seasonal weakness, with both cement demand and prices declining month on month in August.
However, we remain constructive on the sector as YoY trends are still supportive of the current run-rate of volumes, and margins continue to be above consensus estimates.
While variable costs are expected to rise from Q3 FY21 on account of higher costs of petcoke (up 5% YoY) and diesel (up18% YoY), total costs should still be under control given expected lower fixed costs this year (lower spends on sales promotion, travel, rent, repairs, and so forth).
August is seasonally the weakest month of the year for cement volumes, weighed by heavy monsoon rainfall across most parts of the country.
Data for the past 25 years suggests August volumes are 12% lower than the annual average.
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