Cement Industry Sees Revival with Volume Growth, Stable Demand, and Price Hikes
The Indian cement sector is experiencing a revival, driven by robust volume growth, stable demand, and recent price hikes. Industry experts predict a strong growth rate of 7-8% CAGR over FY25E-27E, fueled by positive demand fundamentals and structural cha
Cement IndustryVolume GrowthPrice HikeDemandGovernment CapexReal EstateFeb 11, 2025
According to a report by InCred Equities, profitability in the sector is expected to rise further.
Another report by Motilal Oswal Financial Services Ltd (MOFSL) suggests that the cement industry will witness a robust recovery in the second half of FY25, driven by pent-up demand and increased government capex in the real estate and housing sectors.
The cement demand, as per JM Financial, is expected to remain strong in the coming years, with a growth rate of 7-8% CAGR over FY25E-27E.
Despite a brief slowdown anticipated in FY25, the sector is poised for strong growth, supported by positive demand fundamentals and structural changes.
InCred Equities reported a YoY growth of approximately 6-7% in Q3FY25 for the industry.
Ultratech Cement and Ambuja Cements (consolidated) outperformed the industry with double-digit growth and gained market share.
Shree Cement, focusing on profitable volume, saw a slight decline of around 1%, while Dalmia Bharat’s volume fell 1.5% YoY due to the discontinuation of a JPA assets tolling arrangement.
However, this benefited JK Cement, which saw increased volume in central India.
The average realization improved by around 1% QoQ in Q3FY25, the first time since Q3FY24, with prices showing improvement across regions except for South India.
Dalmia Bharat led with a 3% QoQ improvement in blended realization, followed by Ultratech Cement and JK Cement at 1.6% and 1.4% respectively.
Companies remain optimistic about pricing, expecting strong demand in Q4FY25.
As of December 2024, Yes Securities reported that all-India average cement prices stood at Rs 366, an increase of Rs 8 per 50 kg bag compared to November 2024.
The central region saw the highest price hike of Rs 11 per bag, followed by the south, north, and east regions with an increase of Rs 8 per bag.
The western region saw the least price hike of Rs 5 per bag.
Since the start of December, cement dealers have undertaken incremental price hikes, reversing a period of flat prices that reduced dealer margins and impacted the profitability of cement manufacturers.
The price hike is attributed to increased demand from the real estate sector, better labour availability post-festive season, and an increase in orders from the infrastructure sector due to government push.
InCred Equities believes that profitability, which bottomed out in the previous quarter, has started to show improvement and is expected to continue, supported by the current fuel cost environment, cost savings, and an uptick in cement prices and demand.
The firm expects Q4FY25 to be better, with government-targeted capex reviving and visible in December 2024 spending.
InCred Equities retains an Overweight stance on the sector, with Ultratech Cement and Ambuja Cements as top stock picks.
Leading players like Ultratech Cement, Adani Cements (ACC + Ambuja Cements) have maintained a positive stance on cement demand in India, expecting the industry to grow by an average of 7-9% in Q4FY25.
They are confident of outperforming the industry growth rate.
Other players like JK Cement, JK Lakshmi Cement, and Birla Corporation are expected to grow in line with the industry in H2FY25.
Frequently Asked Questions
What is the expected growth rate of the Indian cement industry over FY25E-27E?
The Indian cement industry is expected to grow at a Compound Annual Growth Rate (CAGR) of 7-8% over FY25E-27E, driven by positive demand fundamentals and structural changes within the industry.
Which companies outperformed in Q3FY25 in the Indian cement industry?
Ultratech Cement and Ambuja Cements (consolidated) outperformed the industry with double-digit growth and gained market share in Q3FY25.
What were the price changes in the Indian cement industry in Q3FY25?
The average realization improved by around 1% QoQ in Q3FY25, with the central region seeing the highest price hike of Rs 11 per 50 kg bag, followed by the south, north, and east regions with an increase of Rs 8 per bag.
What factors are contributing to the demand boost in the cement industry?
The demand boost in the cement industry is attributed to increased demand from the real estate sector, better labour availability post-festive season, and an increase in orders from the infrastructure sector due to government push.
Which brokerage firm has an Overweight stance on the Indian cement sector?
InCred Equities has retained an Overweight stance on the Indian cement sector, with Ultratech Cement and Ambuja Cements as top stock picks.
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