The cement industry may have seen the bottom as far as demand growth is concerned, with demand in the 2015 fiscal likely to revert to 4-6% from more than a decade’s low of near 3% witnessed last fiscal.

The recovery in demand is likely to be led by lower base, along with resumption of capex-related activities in the second half of fiscal 2015 after the formation of a new government, experts believe.

The recent results reported by four of the top five cement players, namely Ultratech, ACC, Ambuja and Shree Cement, show that volume growth for these players slowed down considerably with aggregate volume growth of just 1.96% in fiscal 2014.

Going by the numbers reported by these top four who command nearly 30% market share between them, the cement demand for fiscal 2014 is likely to come in at 2-3% ? the lowest in 13 years.

While Shree Cement witnessed good 8.29% volume growth due to its strong presence in the northern region where recovery has been better aided by supply constraints, ACC, which is a pan-India player, saw volume growth of just 0.71% for the 12 months ended March 31, 2014.

The realisations for these four large companies too witnessed 1-4% fall, with Shree Cement reporting realisation of R3,565 per tonne for the last 12 months ? down 4.13% over the previous 12 months ended March 31, 2013.

The industry players believe that though demand may revert to 8% as gross

domestic product (GDP) growth inches towards 6.5% over the next two years, its unlikely to revert sharply in the near term.

ACC, in its results release recently, said the company does not foresee any

significant improvement in the cement market in the near term.

Raashi Chopra and Sidak Bir Singh Khurana, analysts at Citibank, wrote in a report on April 15: ?India?s cement demand grew at 3.5% (estimated) in FY14 and we expect the growth rate to improve to 6.5% in FY15, 7.5% in FY16, nearly 1.2x GDP growth rate. A case for better growth in FY15 and FY16

can be made as we come off a low base, project announcements/capex should rise, and we expect stronger GDP growth.”

However, experts remain skeptical about improvement on the operational front with industry utilisations unlikely to improve at least for the next one year.

?Our all-India cement demand-supply model suggests cement industry utilisation bottoms out at 68% by fiscal 2015, the same year when we expect capacity additions to peak at 5% growth, and demand growth to be modest at 3-4%. From fiscal 2016 onwards, we assume demand growth accelerates to 7.8% or 19 mmt (assuming a recovery), outpacing supply additions (4.8% growth or 15 mmt) and taking industry utilisation to around 70%,? wrote Ruchi Vora, analyst at UBS last month.

Analysts expect the cement stocks to correct a bit, given the sharp 20-30% rise in the last three months for most of the large cement players.

?Valuations are stretched for the large caps even on two-year forward estimates and even after building in large earnings growth. At current valuations, we see little value in the large cap cement names,? wrote Pinakin Parekh of JP Morgan in a report last week.