Eyeing a strong recovery, the cement industry is expected to report volume growth of 5-6 per cent YoY in Q4FY25, stated a report by Nomura. This, it added, will be on the back of improved demand and channel stocking. “Within our coverage universe, we expect Ultratech and Ambuja to have recorded the highest volume growth, up 14 per cent YoY each, partially on account of inorganic acquisitions. According to our checks with cement dealers, trade prices improved by Rs 7/bag QoQ in Q4FY25 to Rs 344/bag, up 2 per cent sequentially, led by the East and North regions, up Rs 16/bag and Rs 13/bag QoQ, respectively,” the brokerage firm said.
On the cost front, savings from lower fixed-cost/t would be partially offset by increasing pet coke prices. However, Nomura maintained, the full impact of high pet coke should be evident from Q1FY26. “As a result, we estimate operating cost/t to have declined by 3 per cent YoY for the list of cement sector stocks under our coverage. We forecast Q4FY25 EBITDA/t to have improved by an average of Rs 200/t sequentially across our coverage universe. We expect Shree Cement to report the highest unitary EBITDA of around Rs 1,350/t, among our coverage,” it said.
JM Financial said, “We estimate the average EBITDA/tn of cement companies under our coverage to see strong recovery in Q4FY25 owing to seasonal tailwinds in demand supported by ~2-2.5 per cent QoQ price rise and higher operating leverage. EBITDA/tn of our coverage companies is likely to rise by 29 per cent QoQ (+Rs 238/tn) but will still be lower by 2 per cent YoY.” Cement companies started announcing price hikes of Rs 10-50/bag across regions in the first week of Apr’25. 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 the South, JM Financial said, it is hopeful of partial price hike absorption in the market.
Volume growth as dealers push for year-end targets
In Q4FY25, the India cement industry recorded a recovery in demand — from both the trade and non-trade segments. “We believe channel stocking also helped the strong volume growth. We expect the industry to report 5-6 per cent YoY volume growth, while the stocks under our coverage could report average 10 per cent YoY volume growth, supported by inorganic expansions. We expect clinker utilization levels to be around 95 per cent for the top seven cement manufacturers we cover vs 86 per cent in Q3FY24,” Nomura said.
Pricing showed signs of recovery in Q4FY25
Average trade prices improved 2 per cent QoQ in Q4FY25, as the industry pushed for price hikes despite it being a volume-push quarter. The trade price hikes were led by the East and North regions that registered price hikes of Rs 16/bag and Rs 13/bag, respectively, vs Rs 7/bag for pan-India. Nomura said, “We expect companies with exposure to these regions should report better-than-industry expansion of unitary EBITDA. Our recent dealer checks suggest that trade prices increased further by R 5/bag MoM in Apr’25, led by the North and East regions.”
JM Financial, meanwhile, said, “Our channel checks suggest that, in Q4, pan-India average prices have likely increased by 2.5-3 per cent QoQ with ~4 per cent QoQ increase in East and North, ~3 per cent rise in West and Central, and broadly flat sequentially in South. Cement companies started announcing price hikes of Rs 10-50/bag across regions in the first week of Apr’25. We remain hopeful of partial price hike absorption in the market.”
Q1FY26 to bear impact of increasing fuel cost
Average Q4FY25 imported pet coke prices increased 14 per cent QoQ, while imported thermal coal prices further moderated by 8 per cent QoQ. Spot fuel cost generally takes 60-90 days to fully reflect in the income statement due to longer transit times and inventories. As a result, Nomura said that the impact of the recent increase in cost is expected to flow from Q1FY26. “Taking into account the 60-90 days’ lagged fuel cost, we expect the industry to have partially reaped the benefits of lower imported fuel cost in Q4FY25 as well. Furthermore, the industry should also benefit from better operating leverage resulting in lower fixed cost/t. As a result, we estimate an average 3 per cent YoY decline in operating cost/t for the cement companies under our coverage in Q4FY25,” it said.
JM Financial maintained, “We estimate that Shree will report industry-leading margin at Rs 1,415/tn owing to regional price improvement and the company’s on-going efforts to improve its price positioning. JK Cement should also report strong margin (~Rs 1,220/tn) owing to better volumes and regional mix. Despite integration impact of sub-par operations of India Cements/ Kesoram, we estimate >Rs 1,100 EBITDA/tn for UltraTech. Ambuja should likely register the highest delta in profitability improvement on a weak base. Star Cement could also register significant strong profitability owing to absence of outside clinker purchases. Ramco continues to register a weak performance owing to the fight for market share, especially in the South.”