madhav singhania: Earnings recovery seen with commodity prices softening in cement sector: Madhav Singhania, JK Cement
What is the outlook for the cement sector for the new fiscal year 2024?
The outlook for this fiscal year is again pretty good because of the pre-election year. You always have a pretty high government spend on infrastructure as well as housing and you will actually see it coming through.. I mean as far as cement is concerned it always has a multiplier impact in terms of government spending on infrastructure and also it is about 1.2 times GDP growth typically. So given that the GDP numbers look to be around 6-7%, you would see the cement growth also as a high single digit number this year.
When you talk about the GDP estimates, the IMF has recently revised India’s GDP estimates and it is down to 5.9%. World Bank numbers also came out, nonetheless they see India as a bright spot but then revision of these numbers in a way says that India is not completely insulated from other global macroeconomic headwinds. The fact is that the domestic consumption story is still strong. Having said that, what are some of the headwinds that you see for the sector for the rest of the year going forward?
Domestic consumption is something that you cannot take away and as I said that the pre-election year is really an impactful one.
The only headwind that I see for the sector is that as an industry, the commodity price increase has not been passed on to the market. So, despite demand being strong the pricing scenario has been pretty weak which has been reflected in terms of the earnings of most cement companies over the last fiscal year and we do hope to see some recovery with the commodity prices softening in terms of the earnings of the sector.
