Cement Gets Costlier — Can Companies Make Bigger Price Tag Stick

Several analysts expecti cement firms to attempt price hikes before this fiscal is done. Whether they can sustain these increases remains to be seen. Demand recovery and industry consolidation are some of the key factors that could have a bearing on this.

Cement dealers pan-India are making attempts to raise prices in the second half of the fiscal, according to brokerages that have interacted with managements.

But, there are several factors that could hinder cement price recovery in India, and thereby harm the profitability growth of Indian players.

• Jefferies noted average price hikes of 3–4% or Rs 8–12 per bag being pushed out.

• JPMorgan noted prices have increased Rs 5–50 per bag across India, with larger increases in the South and East regions.

• CLSA stated that price hikes in December have ranged between Rs 20–30 per bag in East and Central India, while an attempt of Rs 10 per bag hike has been seen in other regions.

Key factors that could make price hikes unsustainable:

The strong run of cement demand was interrupted earlier in 2024 on the back of heavy monsoons, elections across India and weak demand. As per Nuvama Research, cement demand in November 2024 remained subdued due to festivals, labour shortage, and extreme weather, but a pick up is likely in December 2024.

While analysts expect a rebound in government capex to help improve the cement demand environment across India in the second fiscal half, JPMorgan cautions that in case demand does not improve, the cement price hikes could be rolled back.

However, it is key to note that for now, brokerages do remain positive on demand recovery in the second half of fiscal 2025, with Jefferies expecting a 8–10% year-on-year pick in volumes

As per Jefferies, cement dealers state that while companies have shown the intent to raise prices, certain players in certain regions continue to harm the discipline.

Few companies are prioritising pushing out more volumes at lower prices, in order to gain market share and meet their full year volume targets, the brokerage said. This could harm meaningful recovery in pricing, and thus the industry has to watch out for this situation closely, as per Jefferies.

Nuvama, Morgan Stanley, and Jefferies echoed the view that increasing competitive intensity and aggressive capacity additions set to take place may mean that Indian cement industry will not see substantial price hikes in the near term and prices may be sideways on a full year basis.

While demand recovery is a positive factor for cement players, a 1% change in volumes can only drive a 1-2% change in the average Ebitda of cement companies, stated Jefferies. Thus, an improvement in prices stands more important for company profitability. Jefferies noted how a 1% change in prices drives a 4–5% change in Ebitda.

Fiscal 2026 margin expansion of cement players in India will mainly be driven by cost improvements and operating leverage, with nominal price hikes supporting companies as well, Morgan Stanley said.

• Companies with pan-India franchises and cost-improving capabilities are relatively well positioned, Morgan Stanley said.

• Ambuja Cement Ltd. and UltraTech Cement Ltd. are expected to continue outperforming domestic peers in 2025.

• CLSA remains selective on the Indian cement space and prefers firms with higher growth visibility and cost-saving initiatives.

• JPMorgan prefers ACC Ltd. due to better valuations and price momentum in the South, and UltraTech Cement due to its focus on consolidation.

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