Indian cement industry to register modest growth of 6-8% in FY20

India Ratings in its latest report has said it is expecting that domestic cement demand will register a modest growth of 6-8% in the next financial year (FY20). The modest growth is expected to come mainly on account of the diminishing base effect, increased thrust on infrastructure by the Central government and the affordable housing segment. Maintaining a stable outlook for the sector, the report said that cement manufacturers are poised to benefit from the continuing demand push, led by the healthy growth expected across end-markets such as individual home building, affordable housing, roads, and irrigation sectors.

The report further motioned the capacity utilisations of the cement industry may improve gradually over the next two years on account of limited capacity additions amidst the turnaround of acquired assets. The sector will witness capacity addition of around 20 million tonnes per annum (MTPA) over FY19-FY21 (with higher addition in FY20), and the capacity utilization will increase by 120 bps and 200 bps in FY20 and FY21, respectively.

Besides, between 2008 and 2018, cement demand increased at 6.15% CAGR, while capacity increased at nine percent CAGR. Accordingly, capacity utilization rates dropped to 64% in FY18 from 83% in FY08, leading to increased competition and pressure on selling prices. Any further demand-supply imbalance at the regional level may impact the profitability of the players.

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