Cement sector to grow at 6-7% p.a. in 2025-26, will benefit from surge in construction activities. Should you invest in their stocks? Going ahead, the demand for cement is expected to grow, supported by industry consolidation, a spur in construction-related activities, and cost-efficiency initiatives. Multiple brokerage houses are bullish on the cement sector for these reasons
After experiencing a subdued first half in 2024–25 due to the impact of general elections and intense monsoon season, the cement sector saw a demand revival in the December 2024 quarter. A pick-up in construction activities, improvement in rural demand, traction in the real estate sector, and increase in government spending led to an improvement in cement demand during the quarter.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;} While the demand grew by 2% year-onyear (y-o-y) in the first half of the current financial year, it recovered to 5-6% in the December 2024 quarter, according to a Motilal Oswal report. In the March 2025 quarter, the volumes are expected to jump by 7-8%. The 25 listed cement companies with a market cap of over Rs 1,000 crore reported 4% y-o-y growth in the top line in the December 2024 quarter, compared to a flat growth in the September quarter, as per the Reuters-Refinitiv data.
Most companies (21 out of 25) saw a yearon-year decline in EBITDA margins, but higher operating leverage and lower input costs improved margins quarter-overquarter.
As many as 18 out of 25 companies saw margin gains from September to December 2024. With firm demand and the RBI’s recent rate cut, the cement sector is set to benefit, particularly in individual housing and real estate.
An ICRA report expects cement demand to grow by 4-5% y-o-y in 2024-25, which will improve to 6-7% in 2025-26. Besides, reports from multiple brokerages, such as Axis Securities, JM Financial, Systematix and Motilal Oswal, are constructive on the sector due to significant demand tailwinds and focus on cost savings.
Artificial Intelligence(AI)
Java Programming with ChatGPT: Learn using Generative AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Basics of Generative AI: Unveiling Tomorrows Innovations
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
Generative AI for Dynamic Java Web Applications with ChatGPT
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Performance Marketing for eCommerce Brands
By - Zafer Mukeri, Founder- Inara Marketers
Artificial Intelligence(AI)
Mastering C++ Fundamentals with Generative AI: A Hands-On
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
A2Z Of Money
By - elearnmarkets, Financial Education by StockEdge
Artificial Intelligence(AI)
Master in Python Language Quickly Using the ChatGPT Open AI
By - Metla Sudha Sekhar, IT Specialist and Developer
Office Productivity
Zero to Hero in Microsoft Excel: Complete Excel guide 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Artificial Intelligence(AI)
AI and Analytics based Business Strategy
By - Tanusree De, Managing Director- Accenture Technology Lead, Trustworthy AI Center of Excellence: ATCI
Artificial Intelligence(AI)
AI-Powered Python Mastery with Tabnine: Boost Your Coding Skills
By - Metla Sudha Sekhar, IT Specialist and Developer
Web Development
Advanced C++ Mastery: OOPs and Template Techniques
By - Metla Sudha Sekhar, IT Specialist and Developer
Astrology
Vastu Shastra Course
By - Sachenkumar Rai, Vastu Shashtri
Finance
Crypto & NFT Mastery: From Basics to Advanced
By - CA Raj K Agrawal, Chartered Accountant
Data Science
SQL for Data Science along with Data Analytics and Data Visualization
By - Metla Sudha Sekhar, IT Specialist and Developer
Legal
Complete Guide to AI Governance and Compliance
By - Prince Patni, Software Developer (BI, Data Science)
Web Development
A Comprehensive ASP.NET Core MVC 6 Project Guide for 2024
By - Metla Sudha Sekhar, IT Specialist and Developer
Technology
Certified Jenkins Professional
By - Vskills, India's Leading Certification Body
Office Productivity
Mastering Microsoft Office: Word, Excel, PowerPoint, and 365
By - Metla Sudha Sekhar, IT Specialist and Developer
Marketing
Digital marketing - Wordpress Website Development
By - Shraddha Somani, Digital Marketing Trainer, Consultant, Strategiest and Subject Matter expert
Web Development
Mastering Full Stack Development: From Frontend to Backend Excellence
By - Metla Sudha Sekhar, IT Specialist and Developer
Finance
Financial Literacy i.e Lets Crack the Billionaire Code
By - CA Rahul Gupta, CA with 10+ years of experience and Accounting Educator
Leadership
Business Storytelling Masterclass
By - Ameen Haque, Founder of Storywallahs
Marketing
Future of Marketing & Branding Masterclass
By - Dr. David Aaker, Professor Emeritus at the Haas School of Business, UC Berkeley, Author | Speaker | Thought Leader | Branding Consultant
A Systematix report states that despite modest infrastructure sector allocation in the budget, the increased funding for PMAY Urban and initiatives to boost rural income will drive demand for housing, benefiting the cement sector. On the other hand, JM Financial and Axis Securities’ reports state that industry consolidation will shift the focus towards profitability.
“Sector consolidation is expected to benefit large players through economies of scale, supply chain efficiency and better pricing. Despite capacity additions, the demand will outpace supply in the long run,” states the Axis Securities report.
Besides, efforts of cement players to minimise input cost fluctuations will bode well for the industry. The JM Financial report states that optimising lead distances (distance between manufacturing facility and market), increasing share of green power, and logistics optimisation are some of the initiatives that will help lower costs and improve operational efficiency.
In December 2024, the prices grew by 3% month-on-month, though the price growth remained largely flat in January 2025. Brokerages expect a gradual increase in prices, with increasing competitive intensity acting as a deterrent. A recent Nuvama report believes that the worst is over on the pricing front, but any substantial hike is unlikely in the near term due to the likely shift of industry focus on volumes over pricing in February and March 2025. Motilal Oswal prefers players with a balanced geographic mix, higher capacity utilisation, and a strong track record of capacity expansion and successful integration.
We analysed the prospects of four cement companies that are favoured by most brokerages.
Ambuja Cements
Despite reporting a strong volume growth of 17% y-o-y in the December 2024 quarter, the company reported a weak operating performance amid higher fixed costs and weak realisations.
Under-utilisation of acquired capacities at Penna, Sanghi and Tuticorin led to an increase in costs. However, the management expects that a better demand scenario in the second half of the current financial year and the impact of price hikes (implemented in December 2024) will support performance in the March 2025 quarter.
Moreover, capacity utilisation of acquired assets is expected to improve in 2025-26, which, coupled with the cost efficiency measures, will improve profitability in the future.
Birla Corporation
The company’s December 2024 quarter performance was impacted by weak realisations, with both revenue and EBITDA registering a y-o-y decline of 2.3% and 34.5%, respectively.
Despite a decline in operating costs and volume growth of 7% y-o-y (aided by the ramp-up of utilisation at the Mukutban unit), the demand challenges and higher competitive intensity in the central region weakened the performance during the quarter. The management expects input costs to stabilise and realisations to improve in the coming quarters.
The capacity expansion plans are on track, with the Kundanganj grinding unit and Bikram coal block expected to be completed by the first quarter of 2025-26.
UltraTech Cement
It reported a robust performance in the December 2024 quarter, with an industry-leading volume growth of 11% y-o-y, sequential improvement in realisations and cost efficiency benefits. Increased demand from the infrastructure sector supported the volume growth during the quarter.
The company has completed the acquisition of India Cements, whereas the acquisition of Kesoram Industries is expected to be completed in the March 2025 quarter. The management anticipates double-digit volume growth after the ramp-up of assets of acquired entities.
Moreover, a strong capacity network of India Cements and Kesoram will help reduce lead distance. Also, cost-efficiency initiatives are expected to improve performance in the future.
JK Cement
The company reported a flat y-o-y revenue growth in the December 2024 quarter. However, it surpassed Reuters-Refinitiv estimates by 2.1%. While the volume grew by 4.6%, realisations declined by 4.5% on a y-o-y basis amid pricing pressure. The volumes are expected to improve aided by recovery in the cement demand and capacity additions. The announcement of a 60% stake acquisition in Saifco Cements will help the company expand its footprint in Jammu and Kashmir. Significant potential for infrastructural development in the region, strong limestone reserves of Saifco, and SGST benefits till 2031 (to Saifco) will create synergy benefits in the future.
Current price as of 25 Feb 2025. Construction material industry median 12-M forward EV/EBITDA: 10.8.
Source: Reuters-Refinitiv
#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
This story originally appeared on: India Times - Author:Faqs of Insurances
