Cement capacity to rise 7% by FY28, says Citi; Investec flags 19% upside on JSW

Brokerage firm Citi has revisited its demand-supply outlook for the Indian cement industry, flagging a sharp acceleration in announced capacity additions over the next three years.According to Citi, cement companies have announced expansions of around 158 million tonnes (mt) over FY25-FY28, implying a capacity CAGR of 7.4%. Clinker additions over the same period are estimated at around 77 mt, reflecting a 5.8% CAGR.

The brokerage said UltraTech Cement and Ambuja Cement together account for more than 50% of the planned expansions.
Also read: Novartis AG exits India arm, sells 71% stake to ChrysCapital-led consortiumCiti estimates that clinker-backed capacity additions will translate into an effective supply increase of around 143 mt, or roughly 48 mt per annum over the period.

On a regional basis, effective capacity CAGR for FY25-FY28E is expected at 11% in the North, 7% in the East and Central regions, and 5% in the South and West.

The brokerage highlighted ongoing consolidation in the sector, noting that the top five players now account for more than 75% market share across most regions, except the South, where their share stands above 60%.

On pricing and profitability, Citi said industry utilisation stood at 68% in FY23 following the pandemic, and is estimated at 67-68% during FY25–FY26E.
Pricing CAGR for covered companies between FY23 and FY26 is estimated to be negative 1-2%, although EBITDA per tonne has expanded due to cost efficiencies.Also read: Wall Street falls as financials tumble; US-Iran tensions keep oil elevated

EBITDA per tonne, however, is likely to expand further, supported by cost efficiencies and volume growth.

The brokerage added that consolidation should help prevent any significant fall in prices, although the North region may see relatively higher volatility given the faster pace of capacity expansion there.

Citi’s top picks in the sector are UltraTech Cement, which it values at an EV/tonne of $180 among large caps, and JSW Cement at $90 EV/tonne in the small- and mid-cap space.

Separately, brokerage firm Investec has initiated coverage on JSW Cement with a ‘Buy’ rating and a target price of ₹146, implying an 18.56% upside on Thursday’s last traded price of ₹123.15 apiece.

Investec said JSW Cement stands out for its superior execution, cost leadership and disciplined growth strategy, backed by strong group synergies within the JSW ecosystem.

Investec believes the company’s robust capacity pipeline and structurally advantaged operating model position it to scale into India’s top five cement players by FY30. It also highlighted JSW Cement’s leadership in blended cement and ESG metrics within the sector.

Major cement stocks closed in the red on Thursday, February 19. UltraTech closed nearly 3% lower at ₹12,664, while the stock has delivered 12.19% returns in the past 12 months. Ambuja Cement fell 1.47% to ₹515.30, with the stock gaining 6.72% in the past year. Shares of JK Lakshmi Cement closed 0.49% lower, but have risen 1.38% in the last 12 months.