According to Motilal Oswal Financial Services Ltd. (MOFSL) report, the Indian cement industry is expected to see a robust recovery in the second half of FY25, driven by pent-up demand, a rebound in government capex, and sustained momentum in the real estate and housing sectors.
Industry volumes grew by 3-5% year-on-year (YoY) during October-November 2024, despite a challenging October due to unseasonal rains, a high base from the previous year, and the overlap of festive seasons. Notably, November saw a significant 20-22% YoY growth, recovering from October’s 10-11% decline. For 2HFY25, volume growth is projected at 8-9% YoY, with expectations of a strong start to FY26 during the Mar-Jun period, typically the peak consumption window.
Cement prices have largely remained flat month-on-month (MoM) in November 2024. Historically, second-half realizations have trended lower by 1-6% compared to the first half over FY13-24. Competitive pricing pressures could pose risks to FY25 earnings if these trends persist.
On the cost side, imported petcoke prices rose by 3-5% MoM in November, while imported coal prices (South African) remained stable. Consumption costs for imported petcoke stood at INR 1.20/Kcal, compared to INR 1.65/Kcal for South African coal. Lower fuel prices are expected to improve cement spreads by INR 25-30 per ton in 2HFY25 over 1HFY25. EBITDA per ton is projected to grow 23% 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.
Motilal Oswal Financial Services Ltd. (MOFSL) top picks in the sector include UltraTech Cement (UTCEM), Ambuja Cements (ACEM), and JK Cement (JKCE), 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 expects the Indian cement sector to remains 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.
