Cement Sector Update : Ear to Ground: All eyes on price hikes By JM Financial Services
Ear to Ground: All eyes on price hikes
Our channel checks suggest that pan-India average cement prices declined by a marginal INR 2/bag MoM (down 1% MoM and up 2.5% YoY), to INR 373/bag in Mar’25 owing to yearend volume push. In 4Q, pan-India average prices have likely increased by 2.5-3% QoQ with ~4% QoQ increase in East and North, ~3% in West and Central and broadly flat sequentially in South. Cement industry is likely to attempt an INR 40-50/bag price hike across regions (even higher in South) in the initial couple of months of FY26. With the recent uptick in input prices, likely revision of limestone royalty rates, implementation of mining tax in Tamil Nadu and continued weak operating performance in South, we remain hopeful of partial price hike absorption in the market. Despite the high base, we expect industry demand to increase by mid-single digit YoY in 4Q owing to peak construction season and acceleration in government spending. Besides, we estimate that North will witness significantly better profitability vis-à-vis other regions in 4QFY25
* Pan-India cement prices decline ~1% MoM in Mar’25; up ~2.5-3% QoQ in 4Q: Our channel checks suggest that pan-India average cement prices declined by a marginal INR 2/bag MoM (down 1% MoM and up 2.5% YoY) to INR 373/bag in Mar’25 owing to year-end volume push. The price declined by INR 6-7/bag in South, INR 2-3/bag in North/ West, was broadly flat in Central, and increased by INR 7-8/bag in East. In 4Q, pan-India average prices have likely increased by 2.5-3% QoQ with ~4% QoQ increase in East and North, ~3% in West and Central and broadly flat sequentially in South.
* Cement companies likely to attempt a sharp price hike in Apr/May25; absorption a monitorable: Our channel checks suggest that the industry is likely to attempt an INR 40- 50/bag price hike across regions (even higher in South) in the initial couple of months of FY26. With the recent uptick in petcoke prices (>10% up QoQ in 4Q), likely revision of limestone royalty rates, implementation of mining tax in Tamil Nadu and continued weak operating performance in South, we remain hopeful of partial price hike absorption in the market.
* Industry demand likely to grow in mid-single digit YoY in 4Q: Industry demand is likely to grow in high-single digit YoY in East and Central, mid-single digit YoY in South and MH and be flat YoY in North in Mar’25. Despite the high base, we expect industry demand to increase by mid-single digit YoY in 4Q owing to peak construction season and acceleration in government spending. We estimate that demand will grow at 4-4.5% YoY in FY25.
* Industry profitability to further improve sequentially in 4QFY25 on the back of peak seasonal demand, and further supported by back-ended budgeted government spending and better prices. We estimate that North will witness significantly better profitability than other regions in 4QFY25.
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