The Indian cement industry is expected to witness a robust recovery in the second half of FY25, stated a report by Motilal Oswal Financial Services Ltd (MOFSL). This, it added, will be driven by pent-up demand, a rebound in government capex, and sustained momentum in the real estate and housing sectors.
During October-November 2024, industry volumes grew by 3-5 per cent on-year despite a challenging October due to unseasonal rains, a high base from the previous year, and the overlap of festive seasons. November, however, saw a significant 20-22 per cent YoY growth, recovering from October’s 10-11 per cent decline. For H2FY25, per analysis by MOFSL, volume growth is projected at 8-9 per cent YoY, with expectations of a strong start to FY26 during the March-June period, typically the peak consumption window.
Cement price status
Per the analysis report, cement prices have largely remained flat month-on-month (MoM) in November 2024. Historically, second-half realizations have trended lower by 1-6 per cent compared to the first half over FY13-24. Competitive pricing pressures could pose risks to FY25 earnings if these trends persist, it said.
On the cost side, imported petcoke prices rose by 3-5 per cent MoM in November, while imported coal prices (South African) remained stable. MOFSL said, “Consumption costs for imported petcoke stood at Rs 1.20/Kcal, compared to Rs 1.65/Kcal for South African coal. Lower fuel prices are expected to improve cement spreads by Rs 25-30 per ton in H2FY25 over H1FY25. EBITDA per ton is projected to grow 23 per cent sequentially during this period, supported by marginal realization gains, positive operating leverage, and cost optimization measures, including increased use of green energy, alternative fuels, and improved logistics efficiency.”
According to YES Securities, all India cement average prices are at a level of five years average prices (Rs 365/bag) and per the brokerage firm, the price has already bottomed out and expected to be stable to gradual increase in price going forward. However, the prices are not expected to record a sharp hike of Rs 50-60/bag in near term, instead in the range of Rs 5-10/bag if demand favours. The big catch is the RD (rate difference), the average rate difference has increased and is higher at Rs 35-45/bag which would ideally go to the dealer and distributor from the company pockets.
As of 18th Dec’24, YES Securities said, all-India average cement prices stand at Rs 366 (an increase of Rs 8/bag) of 50 kg bag as compared to Nov’24 exist price of Rs 358/bag. Central region has witnessed the highest price hike of Rs 11/bag followed by south/north/ east of Rs 8/bag while the least price hike of Rs 5/bag in western region. Baring AP/Telangana, most of the pockets have taken a price hike in the range of Rs 5-15/bag which have sustained till now despite a sluggish demand environment.
Top picks
MOFSL’s top picks in the sector include UltraTech Cement, Ambuja Cements, and JK Cement, given their balanced geographic mix, strong capacity utilization, and proven ability to manage cost efficiencies. These players are well-positioned in relatively stable regions like North, Central, and West India, which face less vulnerability to demand-supply imbalances and price volatility.
MOFSL said that it expects the Indian cement sector to remain structurally resilient, with strong demand fundamentals and improving cost structures. “However, sustained price improvements and mitigation of competitive pressures will be critical for realizing long-term profitability,” it concluded.