Cement stocks gained on April 2 as reports suggested that cement companies have taken an average price hike in the range Rs 10-15 per bag across the country. Shares of UltraTech Cement, Shree Cements, Ambuja Cements, ACC and Dalmia Bharat closed trading with gains in the range of one to three percent.
Cement companies in various regions have announced price hikes ranging from Rs 10-15 per bag in the north to Rs 40 per bag in the central and east. However, dealers anticipate the hikes to sustain at Rs 10-20 per bag. In the west, companies have announced an increase of Rs 20 per bag.
Factors such as stocking in March, labour shortage due to Holi and Lok Sabha elections may impact cement demand in April. Dealers are cautious about whether the announced price hikes will hold, analysts said.
Anand Rathi Research favours Shree Cement and Ultratech Cement among large caps. Prabhudas Lilladher identifies Ultratech, Ramco, and Sagar Cement as major beneficiaries in the Southern region due to price hikes, while JK Cement, Shree Cement, JKLC, and Ambuja are favored in the Northern region, and Ambuja, Birla Corp, and Ultratech in the Western region.
Analysts said demand growth is expected to moderate over the medium term, following a recalibration from a high baseline. The year before elections, combined with a focus on housing and capital expenditure in the Union Budget for FY24, is projected to drive cement volume growth to 8-9% in FY24. However, a slowdown in volume growth has been observed since the latter half of the current fiscal year, with this trend expected to continue.
Cement volumes are anticipated to grow at a CAGR of 5-6.5% for FY25 and FY26, constrained by significant capacity additions and moderation in growth. Pan India average capacity utilization levels are likely to remain below 70% over the medium term due to higher capacity additions, particularly by large players. Initial price increases in Q3FY24 were reversed by the quarter's end due to competitive intensity and cost cooling. Cement prices declined further in Q4FY24 and are expected to remain subdued. Analysts forecast a 2-3% decline in cement prices for FY25, considering demand-supply dynamics and intensified competition.
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