The cement sector continues to show signs of stability and growth, as highlighted in the latest report by Jefferies for November 2024. The analysis outlines pricing trends, demand improvements, and industry targets, presenting a roadmap for the next few months. The sector is gearing up for higher volumes and a steady market demand, driven by infrastructure and government-led projects.

Cement Prices Flat in November 2024

Cement prices across India have remained mostly flat in November, marking a period of stability after months of fluctuations. According to the Jefferies report, the prices require a 2-3 percent increase, translating to ₹9-10 per bag each month, to meet revenue and profitability expectations. Despite steady pricing, the industry is preparing for gradual price hikes in the range of ₹10-15 per bag to sustain financial targets.

UltraTech and JK Cement Lead the Pack

The report singles out UltraTech Cement and JK Cement as top picks for the upcoming quarter. These companies have shown resilience in maintaining market share while effectively managing costs. Their strategic positioning in key markets makes them the top contenders for benefitting from the expected price and volume growth.

Demand Growth Shows Signs of Revival

Demand for cement has seen moderate growth in October and November 2024, spurred by increased construction activity and infrastructure spending. The government's focus on capital expenditure (capex) has been instrumental in reviving demand. This trend is expected to continue into the fourth quarter of FY24, providing a significant boost to the sector.

Cement Prices Bottomed Out

The report notes that cement prices have likely bottomed out, signaling that the worst phase may be over for the industry. With the projected demand growth and volume expansion, the market is gearing up for a recovery in margins. The industry aims to strike a balance between price hikes and demand sustainability.

Volume Growth Expectations for H2 FY24

In the second half of FY24, industry volumes are expected to grow by 8-10 percent year-on-year, driven by improved demand dynamics and infrastructure projects. The robust pipeline of government-backed initiatives is expected to support this growth, with steady investments in roads, housing, and urban development.

Challenges Ahead

Despite the optimistic outlook, certain challenges persist. The need for consistent price hikes to maintain margins could face resistance from buyers, especially in price-sensitive regions. Additionally, input costs, particularly energy and raw materials, remain volatile, posing a potential risk to profitability.

Conclusion

The cement sector is poised for steady growth in the coming months, with strong support from demand recovery and pricing adjustments. As key players like UltraTech and JK Cement capitalize on these trends, the industry is likely to see improved profitability and volume expansion. Stakeholders in the sector must watch out for external factors, such as rising costs and economic fluctuations, which could influence future performance.