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Cement Sector: GST rate cut likely to boost demand

ICICIdirect Research 05 Sep 2025 DISCLAIMER

GST rate has been slashed from 28% to 18% on all types of cement. Assuming average All-India MRP of Rs 360-380 per 50 kg bag, GST rate cut can reduce the overall market price by Rs 25-30 per bag

As a key raw material in housing & infrastructure sectors, GST rate cut on cement can potentially boost its demand as it would reduce the overall cost of cement and overall cost of construction (assuming reduction in prices are expected to be passed on to consumers)
After witnessing a muted ~4% YoY demand growth in FY25, cement demand is expected to be better in the coming period (7-8% CAGR over the next 4-5 years), led by pick-up in construction activities (across housing & infra structure segments)

Realizations outlook also remain better considering the gradual improvement in industry’s capacity utilization rates

Cost structure of cement companies remains favourable, led by fuel mix optimization, increasing usage of green power, alternative fuels, focus on reducing lead distance and long-term agreements for raw materials

With improvement in cement prices, continuous focus on operational efficiencies and positive operating leverage, average EBITDA/ton for cement companies is expected to improve by Rs 200-300/ton over the next 2-3 years

We remain positive on UltraTech Cement (Target Price: Rs 15,000), Ambuja Cements (Target Price: Rs 700), JK Lakshmi Cement (Target Price: Rs 1,100) and Dalmia Bharat (Target Price: Rs 2,650)

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