Cement Industry's Promising Growth: A Future Built on Strong Fundamentals

A JM Financial report forecasts consistent growth for the cement industry, with structural shifts ensuring long-term profitability. Despite a brief deceleration in FY25E, robust infrastructure development and strategic cost optimization are set to propel a 7-8% CAGR through FY27E, positioning the sector as a robust investment opportunity.

The cement industry is poised for robust growth between FY25E and FY27E, with projections indicating a compound annual growth rate (CAGR) of 7-8%, according to a recent report from JM Financial. Although a temporary slowdown is anticipated in FY25E, the sector is expected to accelerate thereafter, driven by promising demand fundamentals and structural industry changes.

Key factors underpinning this growth include massive infrastructure development and heightened construction activities across the nation. The report also underscores a strategic shift among cement manufacturers toward cost optimization and de-risking, which could mitigate the industry's cyclical nature, fostering long-term profitability.

Investors are encouraged to focus beyond short-term price volatility in the cement market and instead prioritize structural shifts that promise to enhance profitability. Recent price trends show an upward trajectory, with national cement prices rising 3% month-on-month in December 2024, achieving a 10-month high. A sustained price increase of 5-6% is considered crucial for improving asset returns and supporting capacity expansions.

The industry is expected to significantly expand its productive capabilities, adding about 150 million tonnes of capacity from FY24 to FY27E, with the top six cement groups accounting for approximately 75% of this growth. This expansion is poised to align supply with growing demand, maintaining utilization levels around 72%. consolidation and strategic pricing enhance the sector's potential for sustainable growth, drawing considerable interest from investors in India's infrastructure-centric economy.

(With inputs from agencies.)