Indrajit Agarwal explains why larger cement players will continue to gain market share
Indrajit Agarwal, Senior Research Analyst, CLSA, says there are three or four levers of cost savings. One is higher renewable power usage, second is lower lead distances, third is improving the mix of cement, etc. All those things will lead to profitability improvement. In an environment where the top few players are focusing on both cost savings and market share gain, pricing would be very difficult to come by and that is where larger cement players with better volume growth visibility and cost saving outlook are likely to fare much better than the smaller or regional players.
What have been your key takeaways for materials as a sector?
Indrajit Agarwal: If you look at the sector, what has happened in the past few years and also year to date, we have been in the midst of a structural upcycle driven by all the levers, be it infrastructure, housing, property market, whatever you call it. However, the last six months effectively has been a perfect storm. We have had a confluence of three events which has led to a significant weakness in the demand environment.
First and foremost, we had the elections which generally leads to a softness in demand. Second, monsoons were harsher and much more extended which led to a slowdown in construction activity. Third, the overall weakness in consumer sentiment. All that has led to a much softer demand across the materials category – be it cement, or building materials. But we are poised for a very strong second half even on a stronger base. As prices stabilise, as demand picks
