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Informist, Thursday, Jan. 9, 2025

MUMBAI – Although the cement industry in India is expected to register an improved volume growth of 6% in 2025-26 (Apr-Mar) compared with the 3% projected for FY25, trade prices would likely remain range-bound due to pricing indiscipline in the industry, Nomura Global Market Research Wednesday said in a report. The brokerage expects prices to remain weak due to the market share tussle among the cement-makers. Nomura has cut its estimates of the pan-India cement trade price for FY26 by 8% to INR 353 per bag. 

The brokerage downgraded Shree Cement Ltd. to 'neutral' from 'buy' and raised its target price by 3% to INR 28,000. It has also downgraded ACC Ltd. and Nuvoco Vistas Corp. Ltd. to 'reduce' from 'neutral' and cut their target prices by 20% and 11% to INR 1,920 and INR 330, respectively. At 1027 IST, shares of Shree Cements traded at INR 25,792.60, down 0.9%, shares of ACC traded at INR 1,965.15, down 2.1%, and shares of Nuvoco traded at INR 353.95, down 0.3%, on the National Stock Exchange.

The Indian cement industry recorded a mere 2% volume growth in the first half of the current financial year compared with a 12% growth in the year-ago period, Nomura said, and added that it has cut its estimates for FY25 to 3% from 6%. Unlike the current financial year, the following year would see an uptick in demand, which would primarily be driven by the affordable housing and infrastructure segments.

The affordable housing and infrastructure segments together account for 34% of the total cement demand, Nomura said. While the brokerage raised its estimates for growth in FY26, it said weak rural demand and a slowdown in government spending could have downside implications on growth.

While the industry would likely have recorded a 5-6% growth in volumes in the December quarter, the cement companies that it covers would likely report an 8-9% on-year growth, with Ramco Cements Ltd. expected to report the highest volume growth of 20%, Nomura said. Unlike January, when pan-India cement prices improved by INR 2 per bag, trade prices would have remained flat in the quarter ended December, the brokerage said. 

There will not likely be any significant movement in cement prices in FY26, the brokerage said, and added that any steep price hike will not sustain for long as attempts to increase utilisation would result in pricing indiscipline. Nomura also attributed its negative outlook on pricing to the ongoing consolidation phase in the industry. The southern region will likely see the most moderation in prices in FY26, up to 15%, due to an increased competitive intensity in the region, the brokerage said. 

Cost-saving measures could drive the growth in the industry's earnings before interest, tax, depreciation, and amortisation per tonne, as only limited moderation is expected in imported fuel prices for the cement industry, Nomura said. Spot prices of both pet coke and thermal coal are significantly below the highs of FY23, Nomura said, adding that they have declined at a compound annual growth rate of 14% between FY23 and the first half of the current financial year.

Nomura said it was bullish only on those companies that are actively working towards sustainable cost-saving measures, such as UltraTech Cement Ltd. and Ambuja Cements Ltd. The brokerage firm has maintained a 'buy' rating on UltraTech, Ambuja Cements , and Ramco Cements. It has raised its target price of UltraTech and Ramco Cements by 4% and 6% to INR 12,800 and INR 1,060 respectively. It has cut the target price of Ambuja Cements by 10% to INR 690. Nomura has maintained its rating on Dalmia Bharat and cut the target price by 1% to INR 1,680. 

The brokerage firm expects the company's installed cement grinding capacity to rise to 169 million tonnes by FY26-end. "While we do not incorporate Kesoram and India Cements into our model for the time being, we believe UltraTech should complete these transactions in FY26F, implying 195MT (million tonnes) of cement capacity at an 18% CAGR (compound annual growth rate)(FY24-26F)," Nomura said.

At 1126 IST, shares of UltraTech traded at INR 11,248.70, down 1.4%, shares of Ambuja Cements traded at INR 527.50, down 2%, shares of The Ramco Cements traded at INR 929.20, down 1.5%, but shares of Dalmia Bharat traded at INR 1,803.65 up 0.2% on the NSE.  End

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

Reported by Aman Aryan

Edited by Akul Nishant Akhoury

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