Cement stocks witnessed a notable uptick on April 2, spurred by reports indicating widespread price hikes implemented by cement companies, averaging between Rs 10-15 per bag across the nation. Leading players such as UltraTech Cement, Shree Cements, Ambuja Cements, ACC, and Dalmia Bharat all recorded gains ranging from one to three percent during trading sessions.
From the northern to the central and eastern regions, cement companies have announced varied price hikes, ranging from Rs 10-15 per bag to as high as Rs 40 per bag. However, market analysts predict these increases to stabilize at around Rs 10-20 per bag. In the western region, companies have signaled a Rs 20 per bag hike.
Factors such as March stocking, labor shortages due to festive seasons like Holi, and the impending Lok Sabha elections could potentially impact cement demand in April. Analysts remain cautious about the sustainability of these price hikes amidst such market uncertainties.
Anand Rathi Research has expressed preference for Shree Cement and UltraTech Cement among large caps, while Prabhudas Lilladher identifies Ultratech, Ramco, and Sagar Cement as primary beneficiaries in the Southern region due to the price hikes. In the Northern region, JK Cement, Shree Cement, JKLC, and Ambuja Cement are favored, with Ambuja, Birla Corp, and UltraTech highlighted in the Western region.
While expectations remain high for robust cement volume growth of 8-9% in FY24, driven by pre-election activities and government focus on housing and capital expenditure, analysts anticipate a moderation in demand growth over the medium term. This follows a trend of slowdown observed in volume growth since the latter half of the current fiscal year, which is expected to persist.
For FY25 and FY26, cement volumes are expected to demonstrate a Compound Annual Growth Rate (CAGR) ranging between 5-6.5%. This growth trajectory, however, is anticipated to be constrained by substantial capacity expansions and a moderation in overall growth. Despite this, Pan India’s average capacity utilization levels are forecasted to linger below 70% over the medium term, primarily due to significant capacity additions, particularly by major industry players.
The initial price increases observed in Q3FY24 were ultimately reversed by the end of the quarter, driven by heightened competitive pressures and cost reductions. Cement prices continued to decline in Q4FY24 and are projected to remain subdued in the foreseeable future. Analysts anticipate a further 2-3% decline in cement prices for FY25, taking into account prevailing demand-supply dynamics and intensified competition within the market.
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