India: Cement Prices Declined, But Demand Remains Healthy, Reports Motilal Oswal

In a detailed analysis by Motilal Oswal Financial Services, the cement sector witnessed a notable price decline of approximately 6% in the fourth quarter to date, as compared to the average of the third quarter of FY24. This price adjustment occurred amidst a backdrop of weak cement demand during November and December 2023, attributed to various challenges. However, the scenario began to shift positively in January and February 2024, bolstered by robust infrastructure projects and an uptick in housing demand.

The report highlights that the operating profit margin for the cement industry is expected to remain stable in Q4 FY24. The benefits of favorable operating leverage and softer fuel prices have been counterbalanced by the sequential decline in cement prices. Despite these challenges, the industry is projected to achieve a compound annual growth rate (CAGR) of approximately 7% over the long term. This optimistic forecast is supported by strong demand from infrastructure projects, the housing segment, and an anticipated revival in commercial and private capital expenditures.

Motilal Oswal Financial Services has identified UltraTech Cement Ltd. as its preferred choice in the large-cap space within the cement sector. Additionally, Dalmia Bharat Ltd. and JK Cement Ltd. are favored in the mid-cap segment, owing to their ambitious growth plans and strategic execution strategies.

This analysis underscores the resilience of the cement industry, which is navigating through price fluctuations and demand dynamics. The sector's long-term growth prospects remain promising, driven by foundational infrastructure and housing projects, which are crucial for economic development.

Source: NDTV Profit.