Cement sector: 5 Key reasons why India Ratings maintains a neutral outlook for FY25 despite healthy demand

India Ratings and Research nevertheless has maintained a neutral outlook connected the cement assemblage for FY25.  Amidst steadfast request outlook for FY25 India Ratings says that costs clasp cardinal to profitability of Cement producers.

Here are 5 cardinal reasons for Neutral outlook-

Demand to stay Healthy, Pace of Growth to Moderate

India Ratings expects cement request to turn 5%-7% year-on-year for FY25. This is little than estimated 9% successful FY25 

Although robust infrastructure request and a dependable request from the lodging and commercialized segments would enactment maturation for cement demand, the gait of maturation successful astir segments would beryllium little than FY23-FY24 levels, said India Ratings.

Further the standing bureau adds that Risk besides emanate successful lawsuit of a little oregon uneven monsoon which could impact agrarian spending. The existent wage maturation successful past fewer years person remained muted arsenic per India Ratings

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Rising gait of Capacity Additions

FY25 is acceptable to witnesser highest capableness summation since FY10 and per India Ratings and hence Capacity utilisations are expected to stay Below 70%. Cement producers anticipating beardown cement request successful the mean word person planned important capableness additions. 

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India Ratings  believes astir 75% of the announced enlargement of astir 160 cardinal tonnes is really apt to travel connected watercourse implicit FY24-FY26, with astir 45mnt of capableness apt to travel connected watercourse successful FY25 itself.

Central India to spot autumn successful utilisations

In cardinal India, the ample proviso pipeline is apt to measurement connected the different beardown utilisations implicit the adjacent word , expects India Ratings, portion the westbound could witnesser a year-on-year improvement. East India has seen hihest gait of capableness additions looking astatine drawstring request and limestone deposits. This nevertheless volition support weighing connected utilisations successful the adjacent word portion the confederate portion utilisations would stay astatine the bottom, expects India Ratings.

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Consolidation expected to rise

FY24 witnessed astir 20 cardinal tonne of Cement capacities being acquired  and the apical 2 players accounted for bulk of them.  India Ratings says that this was arsenic per expectations looking astatine the intensifying contention for marketplace share. Ind-Ra believes the assemblage is apt to witnesser further consolidation successful the near-to-medium term, fixed that the assertive medium-term capableness targets of ample players are improbable to beryllium achieved organically 

Per tonne profitability whitethorn dip

 The Cement prices person remained rangebound with manufacturers eyeing marketplace stock gains. After recovering to a small implicit Rs1,000 a tonne successful FY24 from ₹850 a tonne successful FY23 led by the softening of substance costs, India Ratins present expects the Ebitda per tonne of cement companies to diminution to ₹900-950 per mt successful FY25 owing to little realizations.

Disclaimer: The views and recommendations made supra are those of idiosyncratic analysts oregon broking companies, and not of Mint. We counsel investors to cheque with certified experts earlier taking immoderate concern decisions

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Published: 08 May 2024, 05:59 PM IST