Strong GDP To Propel Cement Consumption; Prabhudas Lilladher Initiates Coverage On Cement Sector

Prabhudas Lilladher Report

India’s cement sector plays a pivotal role in building nation's rising infrastructure and supporting its evolving housing sector. Indian cement consumption is expected to show strong 7.5% compound annual growth rate over FY23-26E to ~485 mt led by-

1. Government of India’s strong focus on building infrastructure,

2. increasing urbanisation plus strong urban real estate industry volumes with rising affordability and changing consumer trends,

3. GoI’s efforts on improving rural incomes and

4. increasing private capex across industries.

Envisaging strong demand, Indian cement companies are also expected to add ~130 mt capacities over next three years. Entry of Adani group has ignited competition as existing promoters have announced capacity expansion plans to match growth rate and maintain respective market shares.

Although upcoming elections and incremental capacities are expected to put pressure on cement pricing in the near term, we believe GoI’s continuation of investment focused approach, if re-elected and softer fuel prices will drive strong earnings growth over FY23-26E.

Companies having significant capacities across regions would be ultimate beneficiaries of upcoming demand.

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