Axis Securities Q2FY27 Cement Sector Outlook

Volume growth is expected to reach 7-8% YoY, while EBITDA per tonne remains under pressure.

Reader Takeaway: Demand remains resilient, but sustaining price hikes is essential to offset rising fuel and logistics costs.

What just happened

Axis Securities has released its Q2FY27 outlook for the Indian cement industry, highlighting a robust demand environment supported by ongoing infrastructure projects and urban housing activity. While volume growth projections are strong, the brokerage notes that the operating environment is testing company margins due to elevated costs for pet coke and coal.

Why this matters

The Indian cement sector is experiencing a divergence between strong volume demand and margin volatility. Shareholders should monitor how effectively manufacturers pass on cost increases to consumers. The sustainability of price hikes implemented by major players will be the primary lever for earnings performance in the coming quarters.

The backstory

Historically, the monsoon period often results in negative operating leverage for the sector. While demand for the full year remains solid, near-term earnings are expected to see a gradual recovery rather than an immediate jump, as companies grapple with seasonal slowdowns and competitive capacity additions.

Key Performance Estimates

The brokerage anticipates varying EBITDA per tonne levels across major players, with Star Cement (Rs 1,322) and UltraTech Cement (Rs 935) showing notable estimates for the quarter.

Risks to watch

• Fuel price volatility, specifically concerning imported pet coke.
• Failure to maintain current price hikes in a competitive market.
• Lower-than-expected post-monsoon demand recovery.

What to track next

Investors should focus on management commentary regarding pricing discipline and the ability to maintain market share amidst industry-wide capacity expansions.