Over the past decade, the cement industry has witnessed a decline in utilisation rates, despite which, cement prices have held up fairly well. FY19 is likely to end with near double-digit demand growth, which will also take up utilisation. This much-anticipated event, however, has been a big disappointer as prices did not see any benefit and in fact, unit Ebitda margins contracted in FY19. Lower energy prices are a relief but cement prices are the key, and uncertainty prevails here, which is quite counter-intuitive in the context of rising utilisation rates.
Government focus drove demand in FY19
Utilisation rates to move up:
Energy cost advantage but cement pricing holds the key:
We turn more cautious on the sector
Pricing continues to disappoint, despite robust demand and cost pressure
About the authors:
Vivek Maheshwari, Bhavesh Pravin Shah and Jithin John of CLSA.
We would like to thank Evalueserve for its help in preparing the research reports. Bhavik Mehta (IT); Kamal Verma (Banking & Financial Services); Kushal Shah (Midcaps), Mihir Manohar (Capital Goods, Utilities, Power); and Suraj Yadav (Cement, Oil & Gas) provide research support services to CLSA.