The outlook for the sector is further bolstered by the prospect of a Goods and Services Tax (GST) reduction under the government’s second-generation reform drive. A cut in GST is expected to enhance affordability and sustain demand momentum, particularly in infrastructure and housing segments.
With demand relatively inelastic to price changes, industry volumes are estimated to grow at 7–8% in FY26, aided by government spending, rural recovery post a favorable monsoon, and rising industrial capex.
Regionally, cement prices were stable across most markets in August, though some areas had witnessed marginal corrections earlier in the quarter.
Demand trends were uneven due to heavy rains but are anticipated to rebound post-monsoon, led by accelerated execution of infrastructure projects, affordable housing schemes, and urban real estate recovery.
The southern market, which faced temporary demand moderation, is expected to see renewed momentum in the second half of FY26 as states push infrastructure revival efforts.
On the cost front, the sector continues to benefit from favorable fuel dynamics. Imported coal prices were down ~21% year-on-year in August, while petcoke prices softened 2% during the same period.
These trends have supported margins, with industry spreads remaining steady even as realisations dipped marginally quarter-to-date. However, profitability may witness some sequential pressure due to negative operating leverage in the current quarter.
Looking ahead, the medium-term outlook for the cement industry remains constructive. Stable pricing, government-led infrastructure expansion, potential tax reforms, and sustained demand growth provide a strong foundation for earnings improvement in FY26.
With consolidation gaining pace and input costs trending favorably, the sector is well-positioned to deliver healthy performance, reinforcing its role as a key beneficiary of India’s ongoing infrastructure and housing cycle.
UltraTech Cement: Buy| Target Rs 14,600| LTP Rs 12524| Upside 16%
UltraTech Cement reported strong Q1 results with consolidated revenue up 13% YoY to INR 212.8 b, led by 10% volume growth and 3% better realizations. EBITDA rose 46% YoY to INR 44.1 b as improved pricing and 3% lower opex/t drove profitability.
Operating margin expanded ~470 bps YoY to 21%, due to Mix of better realizations and sharper cost control. PAT rose 44% YoY to INR 22.5 b. RMC revenue jumped 23% YoY on strong infra and housing demand. Integration of ICEM & Kesoram assets is on track, aiding cost efficiency.
Capex of INR 100 b for FY26 is well-managed, with stable debt. Management expects rural and urban housing to fuel further growth. We assign a BUY rating, driven by margin tailwinds, cost control, and healthy demand outlook.
Dalmia Bharat: Buy| Target Rs 2,660| LTP Rs 2351| Upside 13%
Dalmia Bharat is positioned to benefit from sustained cement demand, supported by its capacity expansion roadmap, efficiency measures, and focus on sustainability. The company aims to scale cement capacity to 110–130mt by 2031 through brownfield and greenfield projects.
Alongside, logistics optimization and renewable energy initiatives are expected to strengthen competitiveness and reduce costs. We expect volumes to improve as new capacities ramp up, aided by steady demand in core markets.
The company’s increasing use of alternative fuels and renewable power will further enhance cost efficiency and profitability. We estimate Revenue/EBITDA/PAT CAGR of 10%/25%/37% over FY25-27.
(The author is Head – Research, Wealth Management, Motilal Oswal Financial Services Ltd. Views are own)
(Disclaimer: Recommendations, suggestions, views, and opinions given by experts are their own. These do not represent the views of the Economic Times)
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