Cement firms to see strong demand growth in 1QFY24, EBITDA set to improve: Brokerages

Jefferies has recommended buy on UltraTech, Ambuja, ACC, Dalmia Bharat and JK Lakshmi.

A combination of increased government spending on public infrastructure projects along with increased private capital expenditure is expected to drive demand growth for cement companies in 1QFY24, say brokerages.

According to a recent report by the domestic broking firm Nirmal Bang, the cement segment is expected to see a 12 percent demand growth along with an increase in EBITDA/T by Rs. 150-250/T.

In its reasoning, the domestic broker noted that ongoing major inter-state highway construction projects along with the several under construction rapid transits will keep the demand growth buoyant.

The public sector, which contributes 40 percent to the overall demand, is expected to offset any corrections in demand from the residential and commercial segments.

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Foreign broking firm Jefferies also in its report on June 29 forecast a year-on-year EBITDA growth in the cement segment in 1QFY24. A sharp decline in the prices of pet coke, a key fuel in cement production along with softening crude prices, are expected to balance a marginal decline in prices.

Although an enhanced demand outlook is expected to keep the cement producers’ order books strong, broking firms have also observed that it is unlikely to stimulate cement prices.

While Jefferies expects that price hikes, if any, are unlikely to be implemented now, Nirmal Bang expects an increase in prices only after the festive season which starts in October. After a sharp decline in the 2HFY22, the demand growth trend in the cement segment has remained consistent since 1QFY23.

Jefferies has recommended 'buy' on UltraTech, Ambuja, ACC, Dalmia Bharat and JK Lakshmi.