Indian cement stocks boosted 3% due to increasing bag prices

Indian cement stocks have seen significant price increases, as major companies have imposed price hikes on bags of cement (averaging INR10-INR15 per bag). 

The five key producers (UltraTech Cement, Shree Cements, Ambuja Cement, ACC and Dalmia Bharat) all experienced gains in share price, ranging between one and three per cent on 3 April 2024. 

Sources in the industry have reported that various companies in the region have announced prices increases of INR10-15 per bag in the north. Eastern and central regions can expect price increases of around INR40/bag. Producers in the western regions of the country are believed to have increased bag prices by as much as INR20.

According to the Anand Rathi Research Group, Shree Cement and UltraTech Cement will benefit from the price increase the most. However, financial advisor Prabhudas Lilladher has identified UltraTech, Ramco and Sagar Cement as the major beneficiaries of the hike in the southern region. In the north JK Cement, Shree Cement, JKLC and Ambuja are expected to perform best. In the western regions, Birla Corp, Ambuja and UltraTech are likely to gain a stronger foothold. 

Industry analysts foresee volumes growing at a CAGR of 5-6.5 per cent for FY24-25 and FY25-26. Additionally, they anticipate India’s average capacity utilisation levels to remain under 70 per cent over the medium-term, due to capacity expansion by large players. 

The price increases seen in 1QFY23-24 (ended 30 June 2023) were fleeting, as competitive pressure in the market and cost fluctuations led to prices normalising by the end of the first quarter. Cement prices declined steadily throughout 4QFY23-24 (ended 31 March 2024) and are expected to continue this decline.

A further 2-3 per cent decrease in cement prices, has been predicted by analysts, in FY24-25. This is attributed to demand-supply dynamics and a higher level of competition int he market. 

Analysts have also predicted a moderation in the growth of demand in the medium-term. Despite a spike in cement volume growth to approximately nine per cent in FY23-24 caused by pre-election activities and focus on capital expenditure and housing, a slowing of volume growth has been seen since the second half of the FY23-24.