New Delhi [India], January 15 (ANI): The cement demand is expected to remain strong in coming years with a growth of 7-8 per cent CAGR (compound annual growth rate) over FY25E-27E according to a report by JM Financial.
The report stated that after a brief slowdown anticipated in FY25E, the sector is expected to witness strong growth, driven by positive demand fundamentals and structural changes within the industry.
“Demand for cement is expected to remain strong, particularly after a breather in FY25E, with key demand drivers looking positive and the sector poised for 7-8 pc CAGR over FY25E-27E” said the report.
It also noted that the key drivers for the sector include robust infrastructure development and an increase in construction activities across the country. The report also highlighted a shift towards cost optimization and de-risking strategies among cement manufacturers.
These measures are expected to reduce the cyclical nature of the industry, paving the way for long-term profitability.
One of the report’s critical insights is the need for investors to look beyond short-term price fluctuations in the cement market. It emphasized the importance of focusing on structural changes that are likely to boost profitability over the long term.
It said “investors should look beyond short-term cement price fluctuations and focus on structural changes that are likely to drive long-term profitability”.
Cement prices, which have remained relatively low in recent times, saw a notable recovery in December 2024. Pan-India cement prices increased by 3 per cent month-on-month, marking a 10-month high.
A further sustainable price hike of 5-6 per cent is deemed necessary for improving asset returns, especially for brownfield expansions.
In terms of capacity expansion, the industry is expected to add nearly 150 million tonnes (mt) of installed capacity between FY24 and FY27E. The top six cement groups are anticipated to account for approximately 75 per cent of this additional capacity.
The report added “Factoring in all capacity addition announcements, supply growth is likely to meet demand growth for the foreseeable future. We think utilisation level is unlikely to decline over the next few years, and expect it to remain range-bound at around 72 per cent.”
With increasing consolidation and rationalized pricing strategies, the cement industry appears well-positioned for sustained growth, making it a key area of focus for investors and stakeholders in India’s infrastructure-driven economy. (ANI)
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