Cement Stocks In India: History, Share /Stock Price & News Updates
The structure of the cement industry is currently changing as a result of COVID-19’s requirement that numerous businesses manage their expenses properly.
Cement Stocks: Cement businesses were able to overcome the crisis and return to growth in FY21 thanks to high price levels across all areas and low operating costs.
About Cement Stocks
After China, India is the second-largest producer of cement in the world, and it is also the third-largest user. Housing and real estate account for 65% of cement demand, followed by industrial development and public infrastructure at 25% and 10%, respectively.
The structure of the cement industry is currently changing as a result of COVID-19’s requirement that numerous businesses manage their expenses properly.
Cement Stocks India
Cement businesses were able to overcome the crisis and return to growth in FY21 thanks to high price levels across all areas and low operating costs. According to management commentaries, several leading cement businesses have resumed their CAPEX plans that had been suspended owing to the pandemic.
This demonstrates that significant cement players’ confidence is returning and that the difficult times are mostly behind them.
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The majority of cement businesses have reported increases in raw material, electricity, and fuel costs. These increases, along with rising energy and logistic costs, will make it difficult for cement companies to maintain high realisations and profitability over the medium term.
Cement Stocks Details
Commodity price cooling may lower prices while increasing demand for cement. India’s demand for cement has been negatively impacted by increased construction costs, a limited supply of sand and aggregates, elections, and transportation strikes in some parts of the country. For the top 16 cement producers, cement volumes climbed by an average of 8% in FY22.
Smaller manufacturers regained market dominance in FY22 as a result of logistical issues and irregular demand patterns brought on by local lockdowns in FY21.
Given the nation’s investment in infrastructure, the demand is anticipated to hold steady over the long term. Additionally, the stock will be available after the headwinds at lower prices to buy on the dips. The cement industry requires a lot of capital.
A greenfield facility for 1 MT will cost around Rs. 3 billion in capex (2 MT is an ideal size for a company to have some kind of economies of scale).
Cement Stocks
Volume growth is essential in this industry since it has a high level of fixed costs (maintenance costs are about $5 per tonne yearly). Long term importance of consumer markets and access to raw materials (coal and limestone) is equal.
Therefore, any significant change in the cost of raw materials or in the terms of supplier agreements might significantly reduce production.
The North, South, West, and East must be taken into consideration when analysing the Indian cement sector. In some locations, demand may be favorable or unfavorable.
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It is also very fragmented, with the top six corporations currently controlling 60% of the industry’s capacity and the remaining 40% being split among 40 tiny players.
Since the current environment is difficult, conservative investors should choose top companies. The cost element is crucial for cement producers since more cost savings mean higher profit margins.