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In India, this demand is driven by government investment in infrastructure projects like roads, railways, and housing. The real estate sector, a major consumer of cement, further supports this demand.
India is the second-largest cement producer in the world, contributing 8% of the global installed capacity, second only to China. Despite this scale, cement remains one of the most affordable commodities, priced at just ₹5–7 per kilogram.
Moreover, India’s per capita cement consumption stands at 250 kg, significantly lower than the global average of 550 kg. This indicates ample room for growth as infrastructure development continues to gain momentum, supported by a growing economy.
This presents a compelling opportunity for investors, given its long-term growth potential. However, not all companies in the industry are equally positioned to capitalise on this growth. Identifying the right cement stocks will be key to benefiting from this promising story.
In this article, we look at the five fastest growing cement stocks in India. These stocks are filtered using Equitymaster powerful stock screener.
#1 Shiva Cement
This subsidiary of JSW Cement (JSWCL) produces and sells cement and related products.
The company heavily depends on JSWCL, as it supplies most of its production to JSWCL grinding units in the eastern region. It has a manufacturing capacity of 1.4 million tonnes per annum (mtpa) in Odisha.
The company has reported impressive sales growth over the past three years, with a robust 130.1% CAGR driven by increased supply to its parent company, JSWCL. However, it remains unprofitable due to high depreciation and interest costs.
Adding to its challenges, the company faced a halt in operations from FY22 to June 2023 due to capex, which further strained its financial position.
Borrowings surged to ₹1,470 crore as losses mounted, resulting in a significant rise in interest expenses to ₹100 crore in FY24. Moreover, with no profitability, its debt-to-equity (D/E) ratio remains weak at -9.5, reflecting a negative net worth.
However, the company has gradually resumed operations, achieving sales of ₹350 crore in FY24. As a result, the debt metrics are expected to improve gradually over the medium term.
Furthermore, SCL holds strategic importance for its parent company, JSWCL, and benefits from strong support from its parent. This protects it from any negative financial impact as JSWCL supports SCL with inter-corporate deposits, loans, and funds to maintain its liquidity.
Going ahead, SCL plans to invest about ₹450 crore from FY25 to FY27 to develop a 1.05 mtpa grinding unit and pursue other projects. This facility is slated to begin operations in the first half of FY26.
In addition, the company has announced a rights issue of ₹400 crore at ₹40 per share to assist ongoing expansion efforts and enhance its financial standing.
The income from the new capacity and the proceeds from the rights issue will help SCL strengthen its financial position and lower its debt. Furthermore, its financials will improve due to a strong utilisation rate, lower fixed costs, and the commencement of dolomite sales in FY25.
#2 Shree Cement
Shree Cement is among India’s top three cement producers, with a total capacity of 56.40 mtpa as of June 30, 2024. It primarily sells bulk blended cement to the retail trade segment.
The company generates 94% of its revenue domestically, with the remaining 6% from exports.
Shree Cement has reported impressive sales growth of 15.3% CAGR over the past three years, reaching ₹25,530 crore in FY24. This was driven by strong volume growth amid increasing capacity. On the other hand, its profit grew by 18.7% to ₹2,390 crore, driven by operational efficiencies and lower fuel and power costs.
During this period, Shree Cement achieved an average return on equity (ROE) of 10.6% and a return on capital employed (ROCE) of 13.6%. The company relies on internal resources to finance its growth initiatives, contributing to its strong ROCE. Meanwhile, enhanced profitability has bolstered its ROE.
The company maintains a strong balance sheet, with gross debt amounting to ₹990 crore and a cash balance of ₹5,960 crore, making it a net cash surplus company. Its debt-to-equity (D/E) ratio stands at 0.5, reflecting a manageable debt profile.
Shree Cement has expanded its operations by acquiring five ready-mix concrete (RMC) plants. The company aims to set up 100 more RMC plants in the next three years to maintain its growth trajectory.
The company’s growth will also be supported by expanding cement capacity. It targets to achieve over 80 mtpa capacity by 2028, consistent with its historical capacity growth of 16% CAGR over the past two decades.
It also plans to capitalise on the premiumisation trend, as the share of premium products increased to 8.7% from 7.2% last year. This strategic focus, along with ongoing expansion efforts, is anticipated to fuel revenue growth in the coming years.
The company anticipates enhanced profitability fueled by revenue growth and cost efficiency from stable fuel prices. Additionally, increasing the use of captive green power, currently accounting for 55.9% of total electricity consumption, will further enhance its bottom line.
#3 Sagar Cement
Sagar Cements Ltd (SCL) is a south India-based cement manufacturer with a production capacity of 10.50 mtpa. It generates 70.4% of its revenue from the southern market, 11.7% from Odisha, and 5.7% from Maharastra. The remaining 12% comes from other markets.
Its sales have grown at a CAGR of 22% over the last three years to over ₹2,500 crore in FY24. This growth was led by volume growth, expansion of the Jajpur and Jirawad plants, and incremental volumes from the newly acquired unit of Andhra Cement (ACL).
The recent capital expenditure, including a ₹920 crore investment in ACL, has negatively impacted its finances. As a result, the company recorded a loss of ₹52 crore in FY24, primarily due to increased interest and depreciation expenses.
Moreover, its net debt stood at ₹1,440 crore in FY24 due to capex, including the acquisition of ACL. However, its D/E remains manageable at 0.7. Increased debt and capital spending have affected its return ratios, resulting in an average ROE of 1.7% and a ROCE of 6.2%.
The company aims for a long-term target of 20 mtpa capacity through both organic and inorganic growth strategies.
To this end, it has acquired ACL and plans to invest ₹470 crore to enhance its capacities. Following this investment, the company anticipates reaching an 11.25 mtpa capacity by FY26.
This acquisition is crucial for SCL, enabling deeper market penetration in the southern regions. Additionally, it is expanding into the Eastern and Central areas, where cement demand lags behind the national average.
These expansion efforts and new capacity additions are expected to drive revenue growth in the years ahead. Furthermore, the company intends to use the cash flow from its recent capacity additions to reduce its debt, which will aid in regaining profitability.
The company also targets increasing the share of green electricity to 50% by FY30, up from 11.4% in 2024. Boosting the proportion of captive green power will likely result in cost savings and improved overall profitability.
#4 The Ramco Cement
Ramco Cement (TRCL) is a prominent brand in south India, boasting a total cement capacity of 14.7 mtpa. This area generates 83% of the company’s revenue, while the remaining sales come from West Bengal and Odisha.
TRCL has recorded a strong financial performance, with its revenue growing at a CAGR of 20.8% over the last three years to ₹6,740 crore in FY24. This growth is attributed to strong sales volumes, the introduction of new products, and expansion into new markets.
On the other hand, profit growth was a negative 19.8% during this period, mainly due to a 61.6% decline in net profit attributed to higher interest expenses, depreciation, and escalating costs.
Nevertheless, in FY24, the company successfully returned to profitability, which increased by 15% to ₹390 crore. This recovery was driven mainly by volume growth, reduced fuel expenses, enhanced utilization, and initiatives aimed at cost optimization.
As of FY24, it had a debt of ₹4,920 crore and a D/E ratio of 0.7. This debt has recently increased due to TRCL’s focus on capacity addition. The company reported an average ROE of 8.0% and a ROCE of 8.4%.
Looking ahead, TRCL plans to invest approximately ₹2,600 crore in capital expenditures to increase its operational scope and secure land.
The company is also enhancing its presence in Odisha, West Bengal, eastern India, and Maharashtra to support its diversification strategy. These efforts are expected to drive revenue growth in the future.
The company has outlined additional strategic measures to support these expansion efforts and improve financial stability. TRCL intends to sell non-core assets valued at ₹1,000 crore. The funds from this divestiture will help reduce its debt.
Furthermore, the company seeks to increase its share of captive green power, which is more cost-effective than fossil fuels. It expects these initiatives to improve profitability and further lower its debt burden.
#5 Saurashtra Cement
Saurashtra Cement Ltd (SCL) is a Gujarat-based cement producer with a production capacity of 1.5 mtpa. The company’s sales volume mainly comes from the state, making it heavily reliant on one market.
On the financial front, the company has recorded strong sales growth of 37.9% over the past three years. However, profits declined at a CAGR of 7.8% in FY24, primarily due to rising costs, which led to losses.
The company reported an average ROE of 2.9% and a ROCE of 4.5%. As of March 2024, its debt stood at ₹10 crore, which has doubled since last year. This increase has pushed its debt-to-equity ratio up by 29% to 0.9, but it remains within a healthy range.
Cement is SCL’s primary business, accounting for 98% of its total revenue of ₹1,760 crore. The remainder is generated by its paint division.
The paint division currently contributes minimally to SCL’s revenue. However, management plans to expand this segment to increase growth in the coming years.
Snapshot of fastest growing cement stocks on Equitymaster’s stock screener
Here’s a table showing the above companies and more, across various important parameters-
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Source: Equitymaster
Conclusion
India’s cement industry is poised for sustained growth, fueled by government-led infrastructure development, increasing urbanization, and a booming real estate sector.
The industry is expected to grow at a CAGR of 4.7%, with demand rising from 4 billion (bn) tonnes in 2023 to an estimated 6 bn tonnes by 2032.
The companies highlighted here are well-positioned to capture this growth, with strategic expansions, innovative product offerings, and a focus on cost efficiency.
However, while the sector’s prospects look promising, not all players face the same growth trajectory. Investors should closely examine each company’s financial health, corporate governance, capacity expansion plans, and ability to manage costs effectively in a highly competitive market.
Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.
This article is syndicated from Equitymaster.com
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