The cement industry is set for a revival with industry profitability expected to improve further in Q4FY25 on the back of higher exit prices and better operating leverage led by peak seasonal demand. During the previous quarter, JM Financial said, its coverage companies’ aggregate EBITDA declined by 26 per cent YoY and rose 27 per cent QoQ on a low base led by marginal improvement in realisation sequentially and better operating leverage. Per the brokerage firm, the key takeaways from various management commentaries include: 1) demand likely to be at 6-7 per cent CAGR in the next 2-3 years; 2) prices expected to improve gradually with better demand; and 3) industry targeting sustainable cost savings of Rs 150-200/tn over the next 2-3 years.
In Q3, profitability had witnessed a significant fall led by sharp decline of 9 per cent in realisation, with higher competitive intensity and fight for market share. However, JM Financial said, that was partly offset by better cost structure (down by 2-3 per cent YoY and QoQ) owing to lower input prices and better operating leverage.
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Volume growth
With the government accelerating spending to compensate for its underspending through the fiscal year, Elara Capital said, the cement industry’s volume is expected to improve. “This with the benefits of operating leverage and a steady rise in cement prices since December should aid a sequential recovery in EBITDA per tonne in Q4FY25, for the industry,” the brokerage firm stated.
In the previous quarter, volumes rose by 9-10 per cent YoY and QoQ, stated JM Financial. Larger players, especially UltraTech and Ambuja, gained significant market share. While UltraTech registered 11 per cent YoY volume growth despite larger scale owing to organic capacity additions, Ambuja saw around 17 per cent volume growth mainly led by inorganic acquisitions. In 9MFY25, JM Financial’s coverage companies’ volumes increased by 5.5 per cent YoY, ~200bps higher than industry growth.
Per Elara Capital, industry participants expect volume push to increase, considering that March is a crucial month to meet year-end targets. “Thus, while select markets may attempt price hikes in the range of Rs 5-15 per bag in March,
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