Demand for cement is expected to grow faster than supply, further widening the demand-supply gap and leading to firmer prices.
"Cement prices in the south have witnessed an increase of about Rs 10 per bag and we expect a further hike in the prices down south and up north in the coming weeks," Sharekhan Ltd Senior Vice President Sandeep Nanda said in a research report.
"We did not expect a price cut during the monsoon season. Soon after the monsoon the cement prices were hiked in select regions, mainly in the southern states of India," Nanda said.
Going forward, demand was expected to grow faster than the supply, further worsening the demand-supply situation and leading to firmer prices, he said.
Companies like Madras Cement Ltd (MCL) and JK Cement are investing in captive power, which will keep a check on their variable costs. Many, particularly ACC, are also investing heavily in renewable energy which will fetch additional revenue in the form of carbon credits. Such companies would also get depreciation benefits in the case of investments in wind energy.
"We are positive on the sector going forward, as we expect to see good volume growth coupled with an increase in cement prices which will boost both the top line and the bottom line of the cement companies," he said.