Weak pricing to play spoilsport for cement makers despite strong seasonality in Q4

Even as sales volumes are estimated to have climbed 7-9% as compared with last year, producers have not been able to hike prices as they looked to defend and grow their market share amid rapidly increasing capacities.

As a result, the operating profit made by companies on every tonne of cement sold is seen lower by 9-12% sequentially, or about 150 rupees, analysts said.

This has reflected in the share price performance of most leading cement makers – including , , and Ramco Cement – which have fallen 7-21% in the March quarter, as against a near 3% gain in the benchmark Nifty 50.

Adani-owned and , though, 13-17% noting the strength in other group stocks.

While earnings for have traditionally been compared on a year-on-year basis, there has been a significant fluctuation in raw material prices over the last few months, leading to a quarter-on-quarter comparison.

On a year-on-year basis though, both the operating profit made by companies, and their overall profits are seen growing, analysts said. This will be the third consecutive quarter of earnings growth for cement makers, Motilal Oswal Securities said in a note.

With subdued quarter-on-quarter earnings for the March quarter largely factored in, the focus will remain on the commentary given by cement players, particularly in terms of pricing and capacity additions.

“With cement capacities continually being added by both large and medium-sized companies, pricing is anticipated to remain dynamic and volatile,” Axis Securities said.

Edelweiss Securities has also maintained a ‘neutral’ stance on the sector as it believes that earnings for the current financial year and the next could be at risk.

“Earnings for FY25E/26E are at risk due to likely sluggish demand post elections followed by a seasonally weak Q2FY25 and volatility in cement price amid aggressive capacity expansion in the industry,” it said.